Takeaways

As of September 21, 2018, employers must begin providing employees and applicants with the updated Summary of Consumer Rights.
The revised form contains newly required information concerning a consumer’s right to obtain a security freeze on his/her credit report.

The Consumer Financial Protection Bureau (CFPB) updated its model Summary of Consumer Rights and as of September 21, 2018, employers must begin using it, or at least update existing forms to ensure compliance with a new section of the Fair Credit Report Act (FCRA).   

Background

In May 2018, Congress enacted the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act), requiring consumer reporting agencies to provide “national security freezes” to consumers at no cost. In other words, consumers gained the right to freeze their credit reports for free, during which time reporting bureaus such as Experian and Equifax cannot give potential lenders personal consumer credit report information. This action creates a hurdle for identity thieves looking to open accounts in consumers’ names.

The legislation also “extends from 90 days to one year the minimum time that nationwide consumer reporting agencies must include an initial fraud alert in a consumer’s file.” Fraud alerts inform prospective lenders that a consumer may have fallen victim to identity theft and requires that the lender take active steps to verify the identity of anyone seeking credit in that consumer’s name.

Impact on employers and next steps

The Act makes clear that whenever the Fair Credit Report Act requires an entity to provide a “consumer” with a “Summary of Consumer Rights” a notice regarding that consumer’s ability to obtain a security freeze must be included. This aspect of the law has a direct impact on employers, as employees and job applicants are classified as “consumers” for purposes of the FCRA.

Notably, all employers conducting background checks on applicants must provide a notice of rights because the reports turned over during the check constitute a consumer report covered by the FCRA. It is important to draw a distinction amongst the various types of background checks available to companies in their hiring practices. Merely confirming an applicant’s prior employment history through procuring a list of company names, job titles, and dates does not call on the requirement that an employer provide that applicant with a Summary of Rights. Rather, an investigative background check—involving a report based on personal interviews—does. To refresh, the EEOC has offered helpful directives surrounding the general requirements of background checks. 

Ultimately, because all employers conducting background checks on applicants must provide that applicant with a notice of rights including information concerning the availability of a security freeze, employers must be sure to comply at all times to avoid legal liability. To do so, employers should:

  1. Begin providing employees and applicants with the revised Summary of Consumer Rights, accessible here. To alleviate the impact of this new requirement on companies that use the existing model forms, the CFBP allows for the attachment of a separate page containing the additional required information.
  2. Take steps to make sure Human Resources and company managers are aware of the new form so that it may be incorporated into relevant paperwork.
  3. Contact legal counsel to confirm compliance with the FCRA’s new requirements, especially if continuing to use the old form after the effective date, September 21, 2018.
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