One of the biggest areas of concern these days is the intersection of credit reports and employment. Â On this page, I willÂ lay out a couple ofÂ the scenarios thatÂ run foul of the law.
The Fair Credit Reporting Act (â€œFCRAâ€) applies in the employment context. Â Employers oftenÂ require that a job applicant sign a form allowing access the applicant’s consumerÂ report. A consumer report can be a traditional credit report, but it can also be any type of report related to “credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living” that is used for employment purposes. Â 15 U.S.C. Â§ 1681a. The terms “credit report” and “consumer report” are used interchangeably in this article.
There is nothing unlawfulÂ about requesting or requiring a credit report for employment purposes, butÂ how employers obtain permission to access the report and what they then do when the report isÂ used to make hiring decisions is often illegal.
A. Unlawful Consent Forms
In order to obtain a credit report, the FCRA requires that an employer giveÂ a particular form of notice to the job applicant and get his or her written permission. Â The notice must be in writing and be clear and conspicuous stating that theÂ report will be obtained and used for employment purposes. The notice must also be “in a document that consists solely of the disclosure.” Â 15 U.S.C. Â§ 1681b(b)(2)(A)(i).
The last point is an important one. Â Often employers bundle additional terms and notices into the credit report notice, such as waivers of liability. Â These cannot be lawfully combined with the credit report notice. Â Cases brought based on this violation are usually brought as class actions and have sometimes resulted in large awards orÂ settlements. Some companies that have already been sued for including extra provisions in a notice (such as a waiver of rights)Â includeÂ Whole Foods, Domino’s, K-Mart,Â Home Depot, Panera, AMC Theatres, and Check ‘n Go. A case against Publix for this violationÂ recently resolvedÂ forÂ $6.2 million in favor of former job applicants. It is sometimes complicated to interpret these forms and more complicated to know if there is a violation of the law. Â However, any credit report consent form that fits the following four pointsÂ isÂ worth sending to usÂ for confidential review (if you signed the form as a job applicant).
- any credit report consent form,
- given and/or signed by the job applicant,
- with a large employer,
- within the past five years.
Get in touch if you think you have a credit report consent form that meets these factors. Â Class plaintiffs often receive moneyÂ incentive awards as part of class action settlements in addition to their individual damages.
B. Not Getting HiredÂ Based on your Credit Report
If you apply for a job and the employer considers not hiringÂ you based on the contents of your creditÂ report, they must give you a writtenÂ notice telling you aboutÂ their plans to reject youÂ along withÂ a copy of the report at least five days before making theÂ final decision to rejectÂ your candidacy. Â They must alsoÂ include a copy of a a document calledÂ A Summary of Your Rights Under the Fair Credit Reporting Act. Â ThisÂ is known as the pre-adverse action notice and the requirement is found in 15 U.S.C. 1681b(3)(A).
The pre-adverse action requirement does not apply when the application is made by “mail, telephone, computer, or other similar means.” Â Instead, when an application is made remotely, and a credit report is used to make aÂ rejection decision, you are entitled to get a phone number you can call to get a free copy of the reportÂ and a chance to make corrections.
Many initial screening applications are made by computer these days,Â but once this initial step is passed,Â the next application phase may require that you visit the business in person and complete certain forms. Â If you are subsequently rejected due to credit, you may have a right to the pre-adverse action notice (i.e. a notice before they decide not to hire you).
If you don’t apply overÂ mail, telephone, or computer, andÂ theÂ employer makes a final decision not to hire you based partly on your report, itÂ isÂ required to give you your numerical credit score in writingÂ plus a phone number to get a free copy of the report they used.
As you can see, the requirements on employers rejecting applicants based on credit reports primarily related toÂ givingÂ proper notice,Â and sometimes the ability to correct a report before a final decision is made. Â There is no right to get hired based on a bad report. Â However, the damages for willful noncompliance with the FCRA includeÂ $100-$1,000 per person, potential punitive damages, and attorneys’ fees and costs. Â These cases often come fromÂ aÂ pattern of noncompliance makingÂ class action treatment against the employer possible.
If you think that you have been subject to a pre-adverse or adverse action violation under the FCRA — or if you have a copy of a credit report consent form from a large employer — feel free to get in touch with us for a free, confidential review. Â You may also consider requesting yourÂ personnel records from the your employer.