The Consumer Credit Reporting Reform Act of 1996, which affects credit
reports obtained for employment purposes, became effective on September 28,
1997. Some employers obtain credit reports to determine if the applicant can be
bonded, which may be a requirement if the job position involves handling money.
Under this law, employers who conduct credit checks on employees must:
Disclose to the employee or applicant in advance, the company's intention
to obtain a credit report for employment purposes; and
Obtain written authorization from the employee/applicant to conduct the
credit check.
Prior to taking action based on the report, the employer must provide to the
employee/ applicant:
A copy of the report; and
A description in writing of the rights of the employee/applicant under this
title, as prescribed by the Federal Trade Commission (to be provided by the
Consumer Reporting Agency).
The section of the Consumer Credit Reporting Reform Act of 1996 that deals
with Employment appears below.
Section 604
§ 1681b. Permissible Purposes of Reports
b. Conditions for Furnishing and Using Consumer Reports for Employment
Purposes:
Certification from user - A consumer reporting agency may furnish a
consumer report for employment purposes only if:
The person who obtains such report from the agency certifies to the agency
that:
i. The person has complied with paragraph (2) with respect to the consumer
report, and the person will comply with paragraph (3) with respect to the
consumer report if paragraph (3) becomes applicable; and
ii. Information from the consumer report will not be used in violation of
any applicable federal or state equal employment opportunity law or regulation;
and
The consumer reporting agency provides with the report a summary of the
consumer's rights under this title, as prescribed by the Federal Trade
Commission under Section 609(c)(3).
Disclosure to consumer - A person may not procure a consumer report, or
cause a consumer report to be procured, for employment purposes with respect to
any consumer, unless:
A clear and conspicuous disclosure has been made in writing to the consumer
at any time before the report is procured or caused to be procured, in a
document that consists solely of the disclosure, that a consumer report may be
obtained for employment purposes; and
The consumer has authorized in writing the procurement of the report by
that person.
Conditions on use for adverse actions - In using a consumer report for
employment purposes, before taking any adverse action based in whole or in part
on the report, the person intending to take such adverse action shall provide to
the consumer to whom the report relates:
A copy of the report; and
A description in writing of the rights of the consumer under this title, as
prescribed by the Federal Trade Commission under Section 609(c)(3).
