More Changes to The Fact Act and the FCRA
The Federal Trade Commission recently issued its final rule and revised notices under the Fact Act (a.k.a. the Fair and Accurate Credit Transactions Act). The Fact Act amended the Fair Credit Reporting Act (FCRA) which imposes certain obligations on employers who conduct background checks using consumer reporting agencies. A consumer reporting agency is an entity that collects or evaluates consumer information for a fee in order to furnish background information to third parties. There are two different kinds of reports:
- Consumer reports, which can be oral or written, relate to an individual's character, creditworthiness, reputation, personal characteristics, and mode of living and are taken into consideration by employers when considering applicants for employment.
- Investigative Consumer Reports are prepared by a consumer reporting agency and include, in addition to the items above, personal interviews with individuals associated with the subject of the report.
When companies use consumer reporting agencies, they must first notify the individual that such a report may be obtained and get that individual's permission. If any adverse action is taken as a result of the report, the employer must first provide a copy of the written report to the individual and then must wait a period of time before taking the adverse action. The Summary of Rights, prepared (and recently revised) by the FTC, must be given to the individual who will be the subject of an investigative consumer report at the outset, or at a minimum with the copy of the report prior to taking adverse action. The FTC's final rule, along with other information about the Fact Act is available here. These changes are effective January 31, 2005.