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In the current economy, job-seekers often must jump through multiple hoops to get hired. One way employers may weed out job candidates is by subjecting applicants to credit checks. This growing practice can hurt job applicants who have inaccurate or outdated information on their credit reports. To protect individuals from being harmed by incorrect credit reports, Congress passed the Fair Credit Reporting Act (“FCRA”) in 1970. The law has specific requirements for employers who conduct credit checks on current or potential employees.

Many employers, however, fail to follow the clear requirements of the FCRA. In 2014 alone, lawsuits were filed against Home Depot, Panera, Whole Foods, O’Reilly Auto Parts, and other employers for alleged FCRA violations in job applications.

Your Rights Under the Fair Credit Reporting Act

Under the FCRA, every individual has the right:

– To be informed if someone uses your credit report to take any
adverse action
– To know what is in their credit check file
– To have incorrect information changed
– To prevent agencies from reporting outdated information
• Negative information more than 7 years old may not be
reported

• Bankruptcies more than 10 years old may not be reported
– To limit access to their credit reports to people with a valid
need to see them

Every individual has these rights, and there are requirements that must be followed by anyone trying to obtain someone’s credit report. The requirements for employers getting the reports of potential or current employees are very specific. Violating these rules can result in a monetary penalty.

Employers Must Give You Notice Before Running a Credit Check

Under the FCRA, an employer who wants to run a credit check must comply with the following requirements:

(1) Make a “Clear and Conspicuous” Disclosure

In order to comply with this requirement, an employer must make a “clear and conspicuous” disclosure that they will be seeking a credit check. This disclosure must be written and presented so a “reasonable person” would notice it. In the Seventh Circuit, “clear and conspicuous” has been interpreted to require that the information is presented such that the reader’s attention will be drawn to it. Cole v. U.S. Capital, Inc., 389 F.3d 719, 730-31 (7th Cir. 2004).

(2) Stand-Alone Document

The employer’s disclosure that a credit check will be run must be made “in a document that consists solely of the disclosure.” The Federal Trade Commission (FTC), which administered the FCRA prior to the creation of the Consumer Financial Protection Bureau, has interpreted this requirement to mean information about the credit check must be on its own page. Simply including the disclosure as part of a larger application does not meet this requirement. Advisory Opinion to Hawkey (12-18-97).

(3) Written Authorization

Individuals must consent in writing to allow an employer to obtain a credit report. This consent can be on the same form as the disclosure form.

Employers Must Inform You and Provide the Report if they Take an Adverse Action

If an employer decides, based on the results of a credit check, to take any adverse action against an individual, the FCRA requires they make certain disclosures to that person. In the employment context, this means if an employer decides on the basis of a credit check not to hire or promote someone, that person must be told the reason why and given an opportunity to correct any errors in the credit report.

The employer must provide the following if they make an adverse decision based on the credit report:

– A notice stating the decision was made because of the report
– A copy of the report used to make the decision
– An explanation of an individual’s rights under the FCRA
– The name, address, and phone number of the agency that
supplied the report
– A notice of the person’s right to dispute the accuracy of the
report and to get another free report within 60 days

In several lawsuits filed against employers for violations of the FCRA, job applicants alleged they were turned down for positions based on their background checks, but were never provided with copies of the reports used to make those decisions. See Henderson v. The Home Depot, Inc., 14-cv-2123 (N.D. Ga.).

This is an important part of the law, because otherwise a person who is turned down for a job based on an incorrect credit report may never realize the report needs to be corrected. A 2012 study released by the Federal Trade Commission found that 21% of American consumers had an error on their credit reports. The New York Times recently reported on a job applicant who spent two years looking for work without success, until she discovered that her credit report wrongly stated she had $75,000 in debt.

Damages Are Available for Willful FCRA Violations

Individuals can get damages for either willful or negligent violations of the FCRA. A “willful” violation exists where an employer is aware of the requirements under the FCRA but fails to comply. For a willful violation, the statute allows for statutory damages of between $100 and $1000, actual damages, punitive damages, and the payment of attorney fees and costs. A “willful” violation requires that the employer “knowingly and intentionally” violate the FCRA. Bagby v. Experian Info. Solutions, Inc., 162 Fed. Appx. 600, 605 (7th Cir. 2006). In the case of a “negligent” violation, individuals can be awarded actual damages, costs, and attorney’s fees. A “negligent” violation occurs when the employer failed to comply with the FCRA’s requirements in a situation where the employer knew or should have known the requirements applied. Ippolito v. WNS, Inc., 864 F.2d 440, 449 (7th Cir. 1988).

The Fair Credit Reporting Act is an important protection for workers. It makes sure individuals are judged on their merits, not an inaccurate credit score. If you believe an employer has violated your rights under the Fair Credit Reporting Act, contact one of the consumer attorneys at Hawks Quindel, S.C. for a free consultation.

Caitlin Madden

Associate at Hawks Quindel, S.C.
Caitlin Madden is an associate attorney in Hawks Quindel’s Madison, Wisconsin office, where she represents employees in wage and hour litigation and employment discrimination. A former elementary school teacher, she is passionate about using the law to help individuals who are facing overwhelming challenges.