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Class Action Lawsuits Involving FCRA Violations

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A new rash of class action lawsuits has come to light recently. They involve employers and allegations of their failing to comply with the Fair Credit Reporting Act, more specifically, the FCRA's disclosure and adverse action requirements. In the past two months, four class action lawsuits were filed against employers on the basis that the employer did not properly follow guidelines set by the FCRA.

Each case suggests that the employer did not properly follow the adverse action process. It is alleged that the employer did not provide Pre-Adverse Action notices, to their candidates, before taking adverse action against them.

It is also alleged that the employers did not properly disclose, to their candidates, that a background check was being performed for employment purposes. It is required by the FCRA to make several disclosures that a background check will be performed, and the timing of those disclosures is critical for staying compliant with the FCRA.

An employer MUST disclose to the candidate that a background check will be performed for employment purposes BEFORE the check is conducted. To do this, the disclosure must be in writing and it must be its own document containing ONLY the disclosure. It cannot be a part of an application or any other forms. It should be made very clear to the candidate that a background check will be conducted on them.

The adverse action procedure is also VERY important. The FCRA stipulates that an employer must provide the candidate with a "Pre-Adverse Action Notice," and must give the candidate a reasonable amount of time to review and dispute the accuracy and completeness of the report. The employer may not take any adverse action until the candidate has been given this opportunity. The Pre-Adverse Action Notice must contain a copy of the candidate's report, and a written description of the candidate's "Summary of Rights under the FCRA." This notice should provide the candidate with the contact information of the Consumer Reporting Agency that procured the report, so that the candidate is given the opportunity to dispute any inaccuracies.

In light of all these class action lawsuits arising, we recommend that all employers review their disclosure forms, authorization forms, and policies to ensure they are compliant with the FCRA. The potential damages stemming from these class action lawsuits are considerable. Fines between $100 and $1,000 may be assessed for EACH violation. In addition to these fines, employers may also have to pay other punitive damages, costs, and fees associated with the case.

Case Summaries:

  1. In April 2014, an insurance company in Kentucky was sued for allegedly failing to follow the adverse action procedure. They did not provide their candidates with a copy of their consumer report as well as a copy of their rights under the FCRA before they took adverse action.

  2. In April 2014, a retailer in California was sued for allegedly failing to follow the adverse action procedure. They did not provide their candidates with Pre-Adverse Action Notices before taking adverse action.

  3. In March 2014, a retailer in Virginia was sued for allegedly failing to follow the adverse action procedure. They did not provide their candidates with Pre-Adverse Action Notices before taking adverse action.

  4. In February 2014, a grocery store in California was sued for allegedly using an invalid consent form. The legal validity of the consent form is in question.

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