FTC Joint Ruling May Affect You As An Employer
On July 1, 2009, the Federal Trade Commission (FTC) and several other federal agencies, including the Federal Reserve Board and the Federal Deposit Insurance Corp., issued a joint final rule that imposes additional regulatory requirements on businesses that provide consumer information to consumer reporting agencies. The ruling went into effect on July 1, 2010.
The Fair and Accurate Credit Transactions Act of 2003 (FACTA), which amended the Fair Credit Reporting Act (FCRA), is widely known by consumers as a way to access their credit report on an annual basis free of charge. Each consumer is provided with an opportunity to request a copy of their report from each of the nationwide consumer credit reporting companies (Equifax, Experian and Trans Union).
The Act also provides compliance obligations designed to reduce identity theft through the credit bureaus, government agencies and employers. The Act focuses on the integrity and accuracy of information being provided by “Furnishers – Credit Bureaus and other entities” which supply information to Consumer Reporting Agencies or CRA’s (background screening firms such as EBI), who in turn provide this information within a consumer report to employers for hiring decisions.
Although the term "furnisher" typically relates to a bank or credit card company that provides credit-related information about an individual to one of the nationwide credit bureaus, there are instances where employers provide such information within the meaning of the FCRA. The FTC has determined that companies that provide such information are now considered “furnishers” and need to comply with comparable federal and state laws.
Here are examples:
Employers that outsource employment verifications through a third-party automated database such as Talx and other employment data aggregators.
Employers that provide payroll and other employee related information to consumer reporting agencies.
If you, as an employer, outsource such information in one, or both, of the above scenarios, this new ruling could affect you. Under the July 1, 2010, compliance mandate, employers classified as “furnishers” must now address certain disputes filed by employees within the database supplied by consumer reporting agencies. In other words, if you outsource your employee records through one of the outsourced database services, you may have to deal with consumer disputes directly. In addition, as an employer, you will be required to implement and maintain policies and procedures designed to ensure the accuracy and integrity of information provided to these agencies.
An employer also must investigate a "direct dispute" from a current or former employee regarding the accuracy or completeness of information the employer provided to the consumer reporting agency. Information typically disputed include: the employee's current or former position; dates of employment; compensation; and the reason the employment relationship ended. As a result, if a current or former employee disputes any of this type of information, the employer must conduct an investigation.
Employers should take appropriate steps to assess whether, when and how they are exchanging employment history and other information with any consumer reporting agencies. Employers need to develop and implement policies and procedures that comply with this new mandate. Please be aware that this article should not be considered as legal advice and is only EBI’s understanding of this new FTC mandate. Consult your company’s HR legal counsel for further clarification and compliance measures within your state.
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All information contained herein is provided by Employment Background Investigations solely for the convenience of its clients. EBI is not providing legal advice or counsel and nothing provided on this document should be deemed as legal guidance or advice. Readers should consult with their own legal counsel to determine their legal responsibilities or if they have questions on any information provided by EBI.