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October 2009

Fair Credit Reporting Act Made Easy

By Jim Hulburt

Most companies don’t understand that to utilize the services of a Consumer Reporting Agency (CRA) one does not need to understand all of the Fair Credit Reporting Act (FCRA).  By knowing the basic requirements set forth by the FCRA, and following those standards, you can easily ensure your company’s compliance.  There are four principal steps you will need to follow in order to make sure that this is accomplished: Client Certification, Written Release and Disclosure, Pre-Adverse Action Notice and Post Adverse Action Notification.

The first step in ensuring your company’s compliance is to complete the certification process. Remember that consumer reports are not limited to criminal background checks only, they also include driving records, reference checks,  credit reports, as well as any other reports run by a third party vendor.  So prior to running any of these types of reports you must review and agree to uphold the regulations set forth by the FCRA in writing to your CRA. Once you have done so and are certified to run consumer reports you must follow the following steps each time a report is run:

Once you have achieved your certification the next step to guaranteeing your compliance with the FCRA is providing candidates with a disclosure form and obtaining a written release from that candidate to allow the report to be conducted. The disclosure form must be a clear and understandable form disclosing to each candidate that a background report is going to be requested. The candidate must then give written consent that they understand and authorize the background report to be run. The disclosure form may contain a portion where the candidate can sign to authorize consent, but the FTC, which enforces the FCRA, cautions that this form should not contain excessive information that may distract the consumer.  As a general practice CRAs should provide their clients with all the forms needed for the disclosure and release, if not you should have your forms review by legal counsel.

These forms should not have excessive language that may confuse the information, but it should also not be so brief that the process is not explained thoroughly. Another concern presented is that you must make sure the form does not contain a release of liability meant to protect you, the furnisher of the information sources, or the CRA itself.  But one must also make sure that you are not requiring too much information from the candidate, a release can violate public policy if it asks the candidate to give up unnecessarily rights. Your CRA should have reviewed the local and Federal laws and requirements to create a form that both discloses the information necessary and allows the candidate to give written consent for the background screen to be run.  

When a CRA is merely verifying factual matters, such as dates of employment or salary, a general disclosure form is all that is necessary.   But when your request is to obtain employment references, such as information on job performance, a more in-depth procedure is required. Information obtained on topics such as these fall into a special category of consumer reports called an investigative consumer report.

 If an investigative consumer report is requested there are some specific procedures to follow. There must be a disclosure to the candidate that an investigative consumer report is being requested, along with certain specified language.  Unless it is contained in the initial disclosure you must perform this additional disclosure within three days after the request is made. Most if not all CRAs included this specific language in their original disclosure provided, to make this easier for their clients.

Candidates must also be informed that they have the right to request additional information about the nature of the investigation. They must do so by means of a written request, you then have five days to respond and provide copies of documentation prepared by the CRA along with a copy of the Summary of Rights under the FCRA. As a practical matter, most CRA will handle all of these requirements for you as part of their services.  Still, you should be aware of the procedures.

When a consumer report comes back with information that would make an candidate ineligible to work for your company there are steps that need to be taken before any adverse action is made.  When there is adverse action as a result of the consumer report, the candidate is entitled to certain documents:

The reason is to give the candidate the chance to see the report with the information being used against them before making an adverse action.  If the report is incorrect or incomplete, your candidates then have the opportunity to contact the CRA that proved you the information to dispute or explain what is in the report.  Otherwise candidates could be denied employment without knowing they were the victims of inaccurate or incorrect data. 

As a practical matter, by the time a candidate is a subject of a consumer report, you have spent your time, money, and effort in recruiting and hiring.  Therefore it is in your best interest to give the candidate the opportunity to explain any adverse information before denying a job offer.  If there is an error in the public record, giving the candidate the opportunity to explain it or correct it could be to your advantage.

If there are other reasons for not hiring a candidate in addition to matters contained in the consumer report, the adverse action notice procedure still applies.  Whether the intended decision was based in whole or in part on the consumer report, the candidate has the right to receive the report.  In fact, these rights apply even if the information in the consumer report is not negative.  The candidate is still entitled to review the information pre-adverse action because it is possible that the report is wrong.  In a situation where you would have made an adverse decision regardless of the background report, following the adverse action procedure is still the best practice for legal protection.

A question that arises is how long you must wait before denying employment based upon information contained in the consumer report once you have followed the adverse action procedure.  The FCRA hasn’t set any time frame.  However, many legal authorities advise that you should wait a reasonable period of time before making a final decision.  This period should be the time needed for a candidate to receive and meaningfully review the report and make known to you or the CRA any inaccuracies or incomplete information. This does not mean that you are required to hold the job open for a long period of time.  After the first notice is given, either through written or verbal notice, and you have given the candidate an appropriate amount of time to respond, you may either wait until there has been a reinvestigation or fill the position with another candidate. 

Most employers find this provision of law does not enforce any hardship or burden.  Even in unusual situations the clear benefits of pre-employment screening far outweighs any complications that can arise from compliance.

Once the steps required during an adverse action procedure have been completed and a decision not to hire the candidate has been made there is one more step required.  You must send the candidate a notice of adverse action informing them that you have made a final decision, and may provide a copy of the FCRA form Summary of Rights under the FCRA.

The need for two notifications, while time consuming for you, is deemed necessary to give candidates a maximum opportunity to correct any incorrect or incomplete reports that could affect their chances of employment. Congress intended a candidate be notified twice, both before adverse action and after. This is also the interpretation of the Federal Trade Commission staff. 

Problems arise when you bring a worker on the premises before completing the background check, only to later to find the completed background report uncovers negative information that may have disqualify the person in the first place.  Most people are tempted to simply call the employee in and hand them the report, a final paycheck and both letters at the same time.  However, this does not give the employee a reasonable time to review, reflect and respond to the information.  If the background report is incorrect or incomplete there is not a meaningful opportunity for the employee to exercise his right under the FCRA.  The best procedure is to follow the FCRA by providing the worker with his report, a statement of rights, the first letter and an opportunity to offer a response.  The second letter should be delayed until a reasonable time has passed to allow the candidate to respond.  Although it is administratively more difficult than giving the two letters at once, two letters at once may violate a candidate’s rights.

The FCRA has created an unusual self policing system. In order to ensure compliance all a company needs to do is make sure they meet these specified guidelines. This is easy to accomplish accompanied with the help of your local CRA. 

Jim Hulbert is the Director of compliance for Partnership Screening International a division of Partnership Staffing. He has been a quest speaker to local Human Resource groups across the state on the best Practices for Employment Screenings and Background checks. Jim is also a member of NAPBS National Association of Profession Background Screeners, and has been in the screening industry for 11 years. He is a member of SHRM (the Society of Human Resource Managers), and is also a member of the Richmond and Charlottesville Chapters of SHRM, along with Retail Merchants Association and the Richmond Chamber. Contact Mr. Hulburt at jim@PartnershipScreening.com or (804) 746-3739.

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Member News & Events

Daylight savings time ends on Sunday!

Don’t forget to turn your clocks BACK on Saturday night!!!

Carytown will turn into SCARYTOWN

Saturday, October 31st   

There will be safe Trick-or-Treating from 4-6PM, a Pet's and Kid's Costume Contest starting at 3PM, and merchants are encouraged to advertise specials and sales for that day.  For more info, check out www.carytownrva.org.

From Market Ashland Partnership:

Friday, October 30th—1st Annual Jack-O-Lantern Contest -Judging to be held from 1-4pm.   Pumpkins on display from the 29th - 31st.   (Homemades by Suzanne and Indulgence Salon & Boutique have both offered to host Jack-O-Lanterns for those businesses that do not have storefronts).

Saturday, October 31st—Trick or Treating at our local businesses!!   Come out and join the fun, this will give us all a chance to introduce ourselves to new customers and give back to our great neighborhood!!

Thursday, November 12th, MAP Monthly Meeting at The Supply Room.   

Saturday, November 14th, Train Day!!   Join in on the excitement as thousands of families visit Ashland for our Train Day festivities.  Trolleys will be running, events will be held on the Railroad tracks and at the Hanover Arts & Activities Center.

The Law of Logos:
Introductory Legal & Marketing Perspectives

November 13, 8:30am and again at 3:00pm at RMA

The full service trademark attorneys of the Brandwise Law Firm, P.C. are excited to present this free seminar.  The seminar typically lasts at least 90 minutes and addresses the following topics:

  • What a trademark is
  • Why a trademark is important
  • How to select a trademark
  • Ownership rights
  • Legal liabilities
  • Proper & improper uses of a trademark
  • Trademark protection
  • Trademark maintenance

A live speaker is accompanied by audio-visual content including real world examples, quotes from business leaders, and movie clips.  Space for this event is limited. If you would like to attend, please RSVP by sending your name, organization, number of attendees, and preferred time to rsvp@brandwiselaw.com.

Homes For Our Troops

We at Stephen Thomas Homes are honored to be a vital part of a new home project for Homes For Our Troops.  Homes For Our Troops, a non-profit organization that builds specially adapted homes across the country for severely injured veterans returning from Iraq and Afghanistan, will be building a new home for Army SSG Dwayne Cole (rendered a quadriplegic after being shot in the neck) in Eastern Henrico County. We have volunteered to be the General Contractor for this project, and are currently letting folks know that Homes For Our Troops is actively seeking vendors, trade associates, and individual and group volunteers to help get this home built for Dwayne and his wife (did I mention the home is free,  as in F-R-E-E to the veteran. They are handed the keys upon completion of the project.)  To see more information about this project or sign up to participate in some way, visit Homes For Our Troops/Dwayne Cole’s website.

HOW THIS WORKS:  This is NOT ‘Extreme Makeover, Home Edition’, and it is not a Habitat for Humanity home.  The home will be built in its entirety by skilled labor and tradesmen, all of whom must carry insurance.  There will be a three-day Build Brigade, tentatively scheduled for December 3, 4, and 5 when the house will be framed, roofed, and wrapped. Completion of the home will proceed on a typical new home construction schedule.

Volunteers must register with Homes For Our Troops, who track all this information through their database and know which positions remain to be filled.

In addition to the Build Brigade, there will be a Volunteer Day at the end of the project, and of course there will be a key presentation ceremony.

Thank each of you so much—I appreciate your forwarding this email to anyone you think might be interested in participating in this important project.

Penny Anderson
NEW HOMES * RENOVATIONS
www.stchomes.com

Richmond Folk Festival—Attendee Satisfaction Survey

Thanks for helping us make the Richmond Folk Festival an even better experience for future attendees. Your responses on this brief survey will be completely confidential and will be combined with others who complete the survey.  So please tell us exactly how you feel—what you liked and didn’t like—about this year’s Richmond Folk Festival.  To take the survey, please click here.

E-mail Virus Alert!!!

Do not open any message with an attachment entitled 'POSTCARD FROM HALLMARK,' regardless of who sent it to you. It is a virus which opens A POSTCARD IMAGE, which 'burns' the whole hard disc C of your computer. 
This virus will be received from someone who has your e-mail address in his/her contact list. This is the reason why you need to send this e-mail to all your contacts. It is better to receive this message 25 times than to receive the virus and open it. 

If you receive a mail called' POSTCARD,' even though sent to you by a friend, do not open it! Shut down your computer immediately. This is the worst virus announced by CNN. 

It has been classified by Microsoft as the most destructive virus ever. This virus was discovered by McAfee, and there is no repair yet for this kind of virus. This virus simply destroys the Zero Sector of the Hard Disc, where the vital information is kept. 

PLEASE FORWARD THIS WARNING AMONG FRIENDS, FAMILY AND CONTACTS! 

REMEMBER: IF YOU SEND IT TO THEM, YOU WILL BENEFIT ALL OF US.

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