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Navigating the Fair Credit Reporting Act

By Mark Blondman and Brooke Iley
June 28, 2007

Employers of all sizes use third-party consumer reporting agencies to conduct background investigations such as credit, criminal, education and employment background checks. Such investigations are labor-intensive, costly and require specialized knowledge (especially if the employer has a multi-state presence). Therefore, a third-party vendor is the natural choice for outsourcing such a task. However, employers should beware that outsourcing the background check process does not automatically insulate the employer from liability when it relies on the information in a report. Using such third party reports places the employer squarely within the myriad of requirements under the Fair Credit Reporting Act ('FCRA'). 15 U.S.C. ' 1681. This article highlights some of the key provisions of the Fair Credit Reporting Act as it applies to a broad range of employers and provides practical insight concerning compliance with the FCRA's requirements.

When the FCRA Applies to Employers

The FCRA is a consumer protection law in that it requires consumer reporting agencies to adopt reasonable procedures to ensure the accuracy and fairness of credit reporting and to prevent identity theft. Many of the provisions focus on consumer reporting agencies such as credit bureaus and background checking agencies and those businesses which use such information when determining whether to extend credit or do business with an individual (lenders, insurance companies, etc.).

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