• TOP TIP: Failure to Comply with FCRA Can Be Costly!
  • December 10, 2014
  • Law Firm: Shawe Rosenthal LLP - Baltimore Office
  • Dollar General agreed to pay up to $4.08 million to settle a class action for alleged violations of the Fair Credit Reporting Act. The lawsuit claimed that Dollar General conducted background checks of applicants and made adverse employment decisions without complying with FCRA’s requirements.

    If you are using a third party to conduct background checks of your applicants and employees, FCRA imposes specific notice requirements:

    1. You must provide the applicant/employee with a clear and conspicuous written advance disclosure in a stand-alone document that a consumer report may be obtained for employment purposes. (As noted in paragraph 2, this document may include the applicant’s/employee’s written authorization for procurement of the consumer report.)

    2. You must obtain the applicant’s/employee’s written authorization for the procurement of the consumer report, which may be made in the stand-alone document referred to in paragraph 1.

    3. You must certify, to the entity providing the report, that the company has complied with the above notice requirements and that the information from the consumer report will not be used in violation of any applicable federal or state equal employment opportunity law or regulation.

    4. If the report is going to be used as the basis, in whole or in part, for any adverse employment action (such as a refusal to hire or a decision to terminate), you must provide the applicant/employee with a notice letter, along with a copy of both the report and a summary of rights as contained in an Consumer Financial Protection Bureau (“CFPB”) publication entitled “A Summary of Your Rights Under the Fair Credit Reporting Act” before taking the action.

    5. After waiting a “reasonable” amount of time (not specified by the statute or the CFPB, but we suggest at least 5 days), you must advise the applicant/employee of the adverse employment action.

    In the case above, the company allegedly made decisions not to hire before providing the notice, report and summary of rights referenced in #4. The complaint also claimed that the information in #4 was not provided reasonably in advance of the decision. In addition, the summary of rights that was provided was outdated.

    This case provides a cautionary reminder to employers to comply with the technical requirements of FCRA.