January 1, 2013: New Fair Credit Reporting Act “FCRA” Forms Required by New Enforcement Agency
With little or no ballyhoo, the newly created Consumer Financial Protection Bureau (“CFPB”) has assumed responsibility for enforcement of the Fair Credit Reporting Act (“FCRA”), the role previously allocated to the Federal Trade Commission (“FTC”). This change was implemented by a transfer of FCRA rulemaking authority from the FTC to the CFPB under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The FCRA regulates consumer information. Employers are required to follow specified procedures when they use third parties known as consumer reporting agencies to obtain consumer reports or investigative consumer reports on employees and applicants under the FCRA and the employer uses that consumer report for “employment purposes.” Consumer reports may include credit checks, motor vehicle records and driving history and criminal background information, among other types of information.
The CFPB has issued updated FCRA notices that employers and consumer reporting agencies must use when conducting background checks on employees or applicants. The revised forms, effective as of January 1, 2013, are available in Appendices K, M and N at the end of Title 12 of the Code of Federal Regulations Part 1022 and are substantively the same as the old forms. Each form was revised to replace references to the FTC with references to the CFPB and to provide a link to the new website. They include:
- Appendix K to Part 1022—Summary of Consumer Rights;
- Appendix M to Part 1022—Notice of Furnisher Responsibilities;
- Appendix N to Part 1022—Notice of User Responsibilities.
The Summary of Consumer Rights is the form most used by employers, most notably when obtaining “investigative consumer reports” and sending pre-adverse action letters. Consumer reporting agencies must provide the Notice to Users of Consumer Reports to their employer-customers and must provide the Notice to Furnishers of Information to certain providers of information.
Employers utilizing consumer reporting agencies to obtain consumer reports on applicants and employees who have not done so already should immediately begin using the new notices and take this as a valuable opportunity to make sure they are in compliance with all other FCRA requirements. Failure to use the appropriate notice forms may be deemed a violation of the FCRA among others. The FCRA authorizes both a private right of action brought by an individual and an enforcement action brought by the federal government through the FTC or other federal agencies, including the CFPB. Damages available to individuals are capped at $1,000 for each violation, but can be increased by an assessment of attorneys’ fees, court costs or punitive damages. Do not forget about state laws governing these issues, some of which provide additional requirements for employers seeking consumer reports and greater protections for employees.
Finally, employers should be aware of the recent D.C. Circuit opinion in Noel Canning, a Division of the Noel Corporation v. National Labor Relations Board, No. 12-1115 (D.C. Cir. January 25, 2013). This ruling, invalidating President Obama’s recess appointments to the National Labor Relations Board, now puts into question the recess appointment of Richard Cordray to head the Consumer Financial Protection Bureau which was implemented on the same date, and therefore, notices issued by the Bureau under his direction may also be subject to challenge.