The Consumer Financial Protection Bureau was launched in 2011 after passage of the Consumer Financial Protection Act of 2010, which added provisions to FCRA. Over the last two years, the CFPB has incrementally started taking complaints involving different types of transactions, sending 15-day requests for response to businesses.
On July 10, 2013, the CFPB released two new bulletins discussing debt collection practices along with “action letters” for consumers to use in responding to debt collectors. The action letters include:
- A “more information” letter,
- A “dispute and proof” letter,
- A “contact restriction” letter,
- A “hired lawyer” letter, and
- A “stop contact” letter.
More information and links to the letters are available on the CFPB website by clicking here.
If you use a third-party consumer reporting agency for background, credit, or other checks on employees or job applicants, then keep in mind that there are new forms, effective January 1. The forms were released by the Consumer Financial Protection Bureau. There seems to be an increase in enforcement related to FCRA notices, which is consistent with increased scrutiny promoted through the Obama administration by government agencies of many employment and compliance requirements.
There are reports of increasing litigation over credit reporting activities by employers. That is due in part to the fact that more employers are routinely conducting background checks. It is also due to the fact that employers may not comply with the Fair Credit Reporting Act when it applies. Penalties under FCRA can range from $100 to $1,000 per violation. Also, in addition to actual damages such as lost wages, punitive damages are also available even when actual damages cannot be proved.
There are three disclosure provisions under FCRA. First, an employer must obtain a written authorization form from applicant or employee before running a consumer report. This authorization must be a stand-alone form, not a notice or clause in an application. Second, there must be a pre-adverse action notice when negative information is found. This requirement is often ignored because it can hamstring or slow the employer’s attempt to fill an open position. The law intends that the applicant or employee will have an opportunity to learn the negative information and respond to it. Third, an employer must provide a post-adverse action notice if a decision was based on the negative consumer report. Then, the applicant or employee has a reasonable time to dispute and correct the information.
When an employer obtains a “consumer report” or an “investigative consumer report” from a third party that qualifies as a consumer reporting agency for use in making an employment decision, it must comply with the Fair Credit Reporting Act (FCRA), 15 U.S.C. Sect. 1681 et seq. FCRA limits the purposes for which a report may be obtained to a limited field of uses, including for employment purposes. A consumer report can include driving reports, medical reports, and credit history; it is defined as any communication that provides information about creditworthiness, credit capacity, credit standing, reputation, character, or personal characteristics. An investigative consumer report may include the same types of information—character, general reputation, mode of living. This type of information is obtained through interviews or discussions with co-workers, associates, relatives, or others who know the individual personally. FCRA does not apply if the employer conducts its own investigation, such as interviews of references.