Last month, Hire Right, a pre-employment screening company utilized by businesses across the county, agreed to pay the FTC $2.6 million for violating the Fair Credit Reporting Act!
As more and more businesses require criminal background and credit checks, our government is increasingly interested in ensuring that they’re playing by the rules in order to protect the rights of individuals.
Do your company’s background check processes — and the employment decisions you make because of them — place you in danger of getting into the same expensive trouble?
How Hire Right got in trouble:
What did Hire Right do that caused them to incur such a record-breaking large fine?
- The FTC alleges that Hire Right failed to consistently ensure that the information was current and reflected updates, such as the expungement of criminal records.
- They also alleged that there were times that the same criminal offense information appeared in a report multiple times, and sometimes even appeared for the wrong person.
- In addition, they allege the company failed to investigate disputed items in consumer’s files.
The FTC alleges that these issues, and others, led to individuals being denied employment or other employment-related benefits.
In this economy, anything that affects people’s ability to get work and to continue to succeed at their jobs is a big deal and gets the attention of our government.
Under the Dodd-Frank Wall Street Reform, the new Consumer Financial Protection Board (CFPB) was created. This Board is taking over enforcement of the Fair Credit Reporting Act (FCRA) and some changes will be afoot at the first of the year.
The Fair Credit Reporting Act’s rules:
The FCRA applies to your business if you are utilizing pre-employment checks or background checks to make any type of employment related decision.
We have seen increased pressure from the FTC on compliance, making it imperative that businesses carefully follow the rules, and utilize providers who also are in compliance.
The rules may seem complex, but they boil down to some pretty simple concepts:
- You must get explicit specific permission from a job seeker or employee before conducting a background check.
- You need to make clear to them that the information you gather will be used in decision making which will affect their employment.
- This notice must stand alone and be separate from such things as an employment application.
Adverse actions:
If you gather information from someone that will affect their employment, this is called an adverse action.
Adverse actions include:
- Deciding not to hire a job seeker
- Termination of employment
- Failure to promote an employee
- Any other decision that affects the status of someone’s job or employment
Prior to taking an adverse action: You must notify the individual of the pending action, and give them a copy of the information you’ve received. You must also provide them with a copy of the document A Summary of Your Rights Under the Fair Credit Reporting Act. This allows the individual the opportunity to review the information you’ve gathered to be sure it is accurate, since your decision is dependent on it.
After you’ve taken an adverse action: You must notify the individual of the adverse action. That notification must contain contact information for the organization that performed the background check, a statement saying that the reporting organization did not make the decisions to take the adverse action, and a notice that the individual has the right to dispute the information and receive a free report from the company within 60 days.
The wrap-up:
Be sure you maintain the consumer reports in a secure location, or dispose of them properly. They contain private information that cannot be disclosed to others that do not have a need to know.
As of January 1, 2013, the CFPB will be responsible for enforcement of the FCRA. In conjunction with that, the required forms have been changed. If your company utilizes background checks, be sure that by January 1st you have the new forms implemented in your business!