Are You In Compliance?

by Kent Knobelauch

Disclosure Is Part Of The New Requirements
Do you obtain credit reports on prospective or current employees? Have you used a third party investigative service when conducting workers compensation investigations? Do you use a contract service for pre-employment background checks? If you answered "yes" to any of these questions, you need to be in full compliance with the new Federal Fair Credit Reporting Act (FCRA) which went into effect October 1, 1997.

The requirements of this Law are applicable to major credit reporting agencies such as, TRW, Equifax or Trans Union. The definitions also include data base service companies who check public record information such as such civil records, criminal records, or even just past addresses.

Names you might recognize include CDB Infotek and Trans Union. Consider this scenario. You're investigating an internal theft. As part of the inquiry, you ask an insurance company or independent investigator (not law enforcement), to interview neighbors, friends, or associates of the employee. You seek to obtain information about the employee's creditworthiness, general reputation and personal characteristics. This is the type of information you might gather for employment purposes. In this case, you must notify the employee in writing that an "Investigative Report" has been requested. And, you must make this disclosure within three days after requesting the report. Such a notification could seriously jeopardize your investigation; yet, compliance is mandatory according to the FCRA.

Here are four critical requirements of the new FCRA.

1. Disclosure and Written Consent
   You must give each employee and applicants for employment a disclosure statement and you should ask them to sign a consent before any consumer report is procured. The document should state that the consent will remain in effect during the full course of employment or until revoked. It's best if the disclosure and consent were a separate document, without reference to other subjects.
   
   
2. Certification of the Consumer Reporting Agency
   This document should come from the consumer reporting agency. It should confirm that disclosures have been made and consents obtained. It should also advise that pre-adverse action disclosures will be made if required and additional disclosures will be made if applicable. Lastly, the individual should be informed that further information is available from the agency upon request.
   
   
3. Providing Documents Before Adverse Action
   If a consumer report influences your decision not to hire an individual, or to take any type of negative or adverse employment action involving a current employee, then you must provide the following documents to the individual: a copy of the consumer report and a Federal Trade Commission summary of rights.
   
   
4. Notice After Adverse Action.
   After taking adverse action, you must provide an adverse action notice to the individual. You have the option of giving this notice orally, in writing or electronically. It must contain: the name, address and telephone number of the consumer reporting agency.
   -a statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to inform the consumer as to the specific reasons why the adverse action was taken.
   -a statement of the consumer's right to obtain a free copy of the consumer report by making a request to the consumer reporting agency within sixty days.
   -a statement of the consumer's right to dispute with the consumer reporting agency the accuracy or completeness of any information in the report.
   -Failure to comply with the requirements of FCRA can result in Federal or State level law suits for actual or fixed penalties and possible criminal penalties.
   -I highly recommend that you check to ensure you are in compliance with the new Fair Credit Reporting Act requirements.
   
   Kent is a partner of the firm of Select Search. He is an 18 veteran of law enforcement (now private investigator) specializing in fraud, theft, and embezzlement investigations. He is also known internationally as an instructor in bank security. Select Search has had a leading national law firm compile sample documents and forms that can be used to comply with the four steps of the FCRA requirements referred to above. They are available at a cost of $10.00. Send to Select Search, P.O. Box 2022, Sebastopol, CA. 95472 to order.Telephone (707) 823-8192.
   
   Copyright © 1998 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 8, No. 1, 1/98