The Fair Credit Reporting Act (FCRA), enacted in 1970, is the national law that protects consumers’ credit rights in the United States. This applies not only to traditional credit reporting agencies (CRAs) like Equifax and Experian, but also to employment background screening as well as tenancy screeners. CRAs, under the Act, are entitled to collect and disseminate information about consumers to various agencies regarding criminal and civil records. This may apply to both public and private data; however, the information must be about an individual, as opposed to a corporation or partnership. The language of the FCRA, though, is very broad, which is why it is crucial that CRAs and employers understand their duties and boundaries within the confines of the law.
Under the FCRA, Credit Reporting Agencies have five basic duties.
- Maintain “reasonable procedures” to assure the highest level of accuracy
- Provide consumer reports to only those with a “permissible purpose.” Examples of such a purpose would be for employment, in response to a credit transaction, or for insurance underwriting, among others. Simple curiosity is not a permissible purpose
- Conduct “reinvestigations” in the event of a consumer dispute. Reinvestigation requires the CRA to make a reasonable effort to determine the validity of the original results
- Make all proper and required disclosures to the consumer whose data is being gathered
- Properly dispose of consumer information via shredding, burning, or pulverizing. This disposal requirement also applies to electronic data
An additional complication under the FCRA is the fact that several states, including California, Nevada, Massachusetts, and Kentucky, have their own state-FCRA laws. Under the federal laws governing FCRA, when the state law is more stringent than the federal law, the state law shall prevail. For example, did you know that:
- In Kentucky, CRAs are not permitted to maintain any information against a consumer regarding charges in a criminal case that DID NOT result in a conviction?
- In Massachusetts, CRAs cannot use information about arrests, convictions, or indictments more than seven (7) years old, unless the applicant will make $20,000 or more?
- In California AND Nevada, the use of sex offender registries is forbidden for employment and other purposes?
At The Cedalius Group, we are committed to providing up-to-date information to our clients regarding FCRA laws and requirements for all U.S. states and territories. Please visit us at https://thecedaliusgroup.com or call 404.963.9772 for more information. Because of this commitment, The Cedalius Group is the background screening and credentialing company that you can trust.
The Cedalius Group offers insight into the background screening industry for educational purposes. We always recommend you consult with your legal counsel to determine practices that best suit your business needs.