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Legal Update

CFPB Releases New Version of Model FCRA Summary of Rights Form

23 October 2018
Mayer Brown Legal Update

The US Consumer Financial Protection Bureau (“CFPB”) has issued an updated “A Summary of Your Rights Under the Fair Credit Reporting Act” model form that, as of September 21, 2018, all employers who use consumer reporting agencies to conduct background checks should provide to individuals who are the subject of these checks.

Earlier this year, in response to data breach and identity theft concerns, Congress passed the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Act”). The Act amended the Fair Credit Reporting Act (“FCRA”) to, among other things, give consumers the right to obtain “national security freezes” from nationwide consumer-reporting agencies free of charge. (See 15 U.S.C. § 1681c-1(i).) A national security freeze restricts access to a consumer’s credit report, making it more difficult for identity thieves to open accounts using stolen personal information. The Act further requires that consumers receive information regarding their right to place a national security freeze on their credit report under certain circumstances. (Id. § 1681c-1(i)(5).)

Although the Act is ambiguous as to whether it applies to employers in addition to consumer-reporting agencies, in order to avoid potential liability, employers should update the “A Summary of Your Rights Under the Fair Credit Reporting Act” forms that they use to comply with the amended statutory notice requirements.

Under FCRA, employers who contemplate taking adverse employment action against an individual based in whole or in part on a background report obtained from a consumer-reporting agency must provide the individual with a pre-adverse action letter before taking any adverse action. The pre-adverse action letter advises the individual that adverse employment action may be taken against him/her due to information in a consumer report. The letter must be accompanied by a copy of the consumer report at issue, any applicable state-specific notices and a summary of the individual’s rights under FCRA, as prescribed by the Consumer Financial Protection Bureau. (See 15 U.S.C. § 1681b(b)(3).)

The CFPB recently issued the amended “A Summary of Your Rights Under the Fair Credit Reporting Act” model disclosure form to comply with the new statutory requirements of the Act 1. According to the CFPB, businesses can use the new model disclosure form or a combination of the CFPB’s 2012 version of the disclosure form (or a substantially similar form) along with a summary of the security freeze rights required by the statute “so long as a separate page that contains [that] additional required information is provided in the same transmittal.”

Employers should immediately update their background check documentation to reflect the requirements of the Act. Failure to satisfy FCRA’s requirements may subject employers to liability, particularly in light of the numerous FCRA class action lawsuits that have been filed against employers in recent years based on their purported failure to comply with FCRA’s technical notice and authorization requirements.

1. The CFPB also amended the model form to update the contact information provided for certain FCRA enforcement agencies.

Authors

  • Ruth Zadikany
    T +1 213 621 3916
  • John Zaimes
    T +1 213 229 9545
  • Jeremy C. Y. Hsu
    T +852 2843 5148
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