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Publication

June 15, 2000Client Alert

Fair Credit Reporting Act - Update on Practical Considerations

The Fair Credit Reporting Act (FCRA) can be found at 15 US Code ยง1681(k). The FCRA requires that an employer disclose to the applicant or employee that an investigative consumer report may be obtained. In addition to this written disclosure, the employer must also obtain written authorization from the applicant or employee prior to requesting the report, and if any adverse action is to be taken based on the consumer report, the employer must comply with a two-step process, notifying the applicant/employee of the adverse action.

The written authorization for the report by the applicant or the employee should be on a separate sheet of paper. Also, the employment application still needs to reference the fact that the employee can be terminated for failure to disclose relevant information or lying on the application form. This must be a material misrepresentation of fact in order to support a termination.

This law applies to both current and prospective employees and could apply to such adverse actions as to denials of promotion, cut in pay, failure to hire or rehire, etc.

Before an adverse action is taken, the employer must provide the applicant or employee with:

  1. A copy of the credit report obtained from the CRA.

  2. A summary of the consumer's rights under the FCRA.

It is critical that employers comply with these laws, as a strong case for termination or non-hire could be turned into a losing case by not following the appropriate policies or procedures of the Fair Credit Reporting Act.

For more information, please contact Rob Mulcahy at rwmulcahy@michaelbest.com or 414.271.6560.

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