Fair Credit Reporting Act (1970)
10 July 2006Fair Credit Reporting Act (1970)
(as amended by the Consumer Credit Reporting Reform Act of 1996 and the
Fair and Accurate Credit Transactions Act of 2003)
15 U.S.C. §§1681 et seq.
Coverage and Prohibition: The Fair Credit Reporting Act (“FCRA”) was initially passed as part of banking legislation to protect the privacy of consumer credit report information and to guarantee that the information provided by credit bureaus is accurate. The FCRA allows employers to use “consumer reporting agencies” to obtain “consumer reports,” i.e., to perform credit or other background checks (including criminal, reference, or driving record checks) on applicants or employees and to make employment decisions based on that information only if they comply with comprehensive notice, consent, and disclosure obligations both prior to performing the checks and after the results are reported. The statute defines “consumer reporting agency” as any person who, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties. A “consumer report” is defined broadly to include any written, oral, or other communication of any information by a consumer reporting agency regarding a consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used as a factor to establish the consumer’s eligibility for employment.
Amendments to the FCRA under the Fair and Accurate Credit Transactions Act (“FACTA”) prohibit employers from receiving medical information from consumer reporting agencies unless the information is relevant to the employment and the applicant or employee has given prior written consent. In addition, under FACTA, the Federal Trade Commission (“FTC”) issued rules governing the disposal of sensitive consumer report information by persons, like employers, who, for a business purpose, maintain or possess consumer report information.
Enforcement: The FTC enforces and administers the FCRA and FACTA except to the extent that enforcement responsibility is specifically committed to another agency under the FCRA. A violation of any requirement or prohibition imposed under the FCRA is treated as an unfair and deceptive act or practice under the FTC Act for which the FTC may sue in federal court on behalf of injured parties. However, criminal penalties for violations are handled by the Department of Justice. Persons affected by an employer’s violations of the FCRA also may sue in federal court.
Remedies: In an action by the FTC, violators are subject to various monetary and injunctive penalties including, for those who knowingly violate the FCRA, up to $2,500 per violation. In addition, the court may grant any other appropriate relief other than punitive damages. Persons affected by an employer’s negligent noncompliance with the FCRA may recover actual damages, court costs, and attorney fees. Additional penalties, including criminal penalties and potential jail time, are available in cases of willful noncompliance or if the report was obtained under false pretenses or knowingly without a permissible purpose.
Related Regulations:
FTC: Disposal of Consumer Report Information and Records, 16 C.F.R. Part 682.
FTC: Model Forms and Disclosure under the Fair Credit Reporting Act, 16 C.F.R. Part 698.
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