Employer Credit Checks Create Growing Litigation Risk
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The Fair Credit Reporting Act was passed in 1970 to help consumers ensure that information about their credit stayed both private and accurate. However, a new report from Littler Mendelson explains that recently the FCRA has been used as fodder for class action lawsuits that target employers for alleged noncompliance with rules governing how companies should use credit reports, also known as consumer reports, in the hiring process.
The Littler report, “The Swelling Tide of Fair Credit Reporting Act Class Actions: Practical Risk-Mitigating Measures for Employers,” shows where liability for employers under the FCRA is increasing, and provides insight on how companies can mitigate risk.
According to the report, the FCRA requires employers to go through several steps if they want to get a consumer report that contains information about a job applicant’s credit. They must provide a clear and conspicuous written disclosure of the fact that they intend to obtain this type of report, and get the applicant to sign off on it. If the results of the consumer report contribute to a decision to take adverse action against the job applicant, then the employer must provide notice before the action is taken, including a copy of the consumer report and a “summary of rights,” to the applicant, while giving them a window of time to discuss the report with the employer before they are given a final adverse-action notice.
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