FCRA Model Disclosures Updated: Compliance Required by September 21, 2018

Credit hacker

On September 12, 2018, the federal Consumer Financial Protection Bureau (CFPB) updated two model disclosures. The following documents now reflect changes made to the Fair Credit Reporting Act (FCRA) by the Economic Growth, Regulatory Relief, and Consumer Protection Act:

  • Summary of Consumer Rights: This is a summary of the consumer’s right to obtain and dispute information in their consumer report and to obtain credit scores, which employers and consumer reporting agencies must distribute, as applicable.
  • Summary of Consumer Identity Theft Rights: This is a summary of the rights of identity theft victims, which is distributed by consumer reporting agencies (not employers), as applicable.

The FCRA required the CFPB to write model forms of these documents that employers and national consumer reporting agencies (CRA) may use or adapt to ensure FCRA compliance.

Legal Background

The FCRA regulates an employer’s use of background checks, including credit or criminal background reports. For example, employers must:

  • Notify applicants or employees that information gained from these reports may be used when making decisions about employment. This notice must be provided in stand-alone, written format. The notice cannot be in an employment application and must be clear and concise.
  • When seeking an investigative report (a report based on personal interviews concerning a person’s character, general reputation, personal characteristics, and lifestyle) employers must notify applicants or employees of their right to a description of the nature and scope of the investigation.
  • Employers must obtain applicants’ or employees’ written, advance consent to perform background checks. Required consent may be included with the notice. However, if an employer is seeking to obtain background reports throughout the employment relationship, then this must be clearly and conspicuously disclosed.
  • Employers must also certify to companies that provide these reports that they:
    • Notified applicants and got their permission to get a background report;
    • Complied with all of the FCRA requirements; and
    • Will not discriminate against applicants or employees, or otherwise misuse the information in violation of federal or state equal opportunity laws or regulations.

Now, the Economic Growth, Regulatory Relief, and Consumer Protection Act comes into play where, among other changes, it required that the CFPB modify its disclosures.

What’s Changed in the Disclosures?

The Economic Growth, Regulatory Relief, and Consumer Protection Act added a new section 605A(i) to the FCRA, which now requires both of the following, as are reflected in the newly released CFPB’s model disclosures:

  • Employers and CRAs must provide consumers with a new notice of their right to a national security freeze, free of charge, whenever they are required to provide either of the summary disclosures. This national security freeze restricts prospective lenders from obtaining access to a consumer’s credit report and makes it more difficult for identity thieves to open accounts in the consumer’s name.
  • Nationwide consumer reporting agencies must also include an initial fraud alert in a consumer’s file within one year (extended from 90 days). A fraud alert informs a prospective lender that a consumer may have been a victim of identity theft and requires that the lender take steps to verify the identity of anyone seeking credit in the consumer’s name.

What Now?

Employers and CRAs must ensure their disclosures meet these new requirements. The CFPB permits the use of the new model disclosure or a combination of the 2012 disclosure forms along with a summary of the security freeze rights; however, a separate page that contains the additional required information must be provided in the same document.

The security freeze right, the notice requirement, and the change in duration for initial fraud alerts are all effective September 21, 2018.

Download the revised Summary of Consumer Rights and revised Summary of Consumer Identity Theft Rights and read the press release.

We Are On It

The Federal Background Check Requirements page of the ThinkHR compliance library has already been updated to reflect the latest guidelines. Count on ThinkHR to keep you up to date on all regulatory issues.

About Samantha Yurman, JD

Samantha Yurman is one of ThinkHR's legal editors. She is a licensed attorney in California and Florida with over 16 years of experience researching and analyzing human resources legislation and law. Samantha uses her expertise to translate highly technical legal topics into usable information for our clients.