On September 12, 2018, the Consumer Financial Protection Bureau (“CFPB”) issued an interim final rule, which is tied to the Economic Growth, Regulatory Relief, and Consumer Protection Act (“the Act”). The law was passed in response to several high-profile data breaches. The Act amends the Fair Credit Reporting Act (“FCRA”) and outlines new requirements for credit bureaus related to security freezes and fraud alerts.
These requirements are also relevant to background check companies and employers who utilize pre-employment background checks. The interim rule also includes an updated version of the model FCRA Summary of Rights disclosure form. The interim final rule went into effect on September 21, 2018.
The Act also requires credit bureaus to provide consumers with fraud alerts and free national security freezes and freeze releases, under certain circumstances. These new measures are in place to protect victims of identity theft and makes it harder for identity thieves to open accounts in a consumer’s name.
Under the FCRA, employers and background check companies are required to provide the “A Summary of Your Rights Under the Fair Credit Reporting Act” disclosure form to employees and prospective employees at certain times. The new notice language required by the Act prohibits a background check company from releasing consumer information in an individual’s credit report without express authorization from the individual. Failing to properly provide the notice can lead to significant liability, including class action lawsuits.
Employers and background check companies must immediately update their disclosure forms to maintain compliance. Background check companies need to provide employers with the model disclosure form; and employers need to provide prospective employees with the model disclosure form if the employer considers not hiring an applicant or withdrawing an employment offer based on an adverse finding on a background check. Background check companies must also provide the model disclosure form to any consumer who requests a file disclosure pursuant to the FCRA.