12.19.2012

Do You Know the Fair Credit Reporting Act Changes for 2013?

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Give candidates a chance to prove their identity

Before you launch into any background checks on employees in the new year, you should know  there’s a new Fair Credit Reporting Act Summary of Rights form that employers must use starting January 1, 2013. The new form doesn’t change any of the rights. But it’s part of a sea change in how the Federal Trade Commission is treating erroneous FCRA reports.

Criminal Activity Now Under FCRA

In the past, Fair Credit Reporting Act rules only covered a candidate’s credit history. But now, the regulations cover criminal activity as well. So if issues in either of those areas pops up on a background check, employers have to share that information with candidates and give them a chance to dispute it. Too often, errors show up and good candidates can be rejected because of mistaken identity or other issues.

In August 2012, the FTC leveled $2.6 million fine against HireRight Solutions Inc., a credit reporting agency, for its sloppy handling of information gleaned from background checks. It was the first time the FTC ever did that. But not the first time a CRA made huge mistakes like assigning criminal records, financial problems and other detrimental findings to the wrong people. The FTC also cited HireRight for failing to maintain procedures to ensure the information was as accurate as possible; failing to provide consumers with information in their files in a timely manner, failing to make sure results of investigations were available to all parties and failing to comply with requirements for CRAs.

The bottom line is, when employees fill out applications, they’re supposed to tell you the truth. You do a background check to verify that they did so. But if something pops up on the background check that they didn’t divulge on the application, you need to make sure the candidate sees it in a timely manner and has time to dispute it. If they do dispute it, they have five days to clear the problem up before you can take any adverse action—such as rejecting them or hiring somebody else.

If they don’t dispute it, if the new information is true, you can often choose not to hire them on the basis that they didn’t divulge the information as required on the application. Still, companies have to be savvy with background checks.

Common Sense HR

For one thing, unless there’s a major omission, companies have to decide whether or not the issue on the background check is actually related to the job. If the person isn’t going to be handling money, some late payments may not be a good reason to reject a candidate. But if the person’s going to be driving a company car, having a DUI conviction is a definite problem. If the person failed to mention it and it showed up on the background check, that’s grounds for adverse action. Be careful about your terms though, convictions not arrests. In a dozen states, having an arrest record is not a valid legal reason to refuse a candidate. Texas isn’t one of those states.

Secondly, employers should save themselves a lot of headaches by seeking out

more reputable CRAs.  The National Association of Professional Background Screeners has an accreditation program and policies and procedures, for example, to try to elevate the level of professionalism among CRAs.  They have a directory of members who have gone through the accreditation process.

Finally, get the new form and follow the rules. The mess that may ensue because you didn’t fill the position is a lot easier to deal with than the mess that happens when you jumped over the regulations, leaving potentially illegal actions and disgruntled ex-candidates in your wake.

We can help make sure your processes meet Fair Credit Reporting requirements. We work with companies on a project basis or on retainer, providing a custom level of HR help designed for your business. Contact me at Caroline@valentinehr.com or call (512) 420-8267.

 

We work with companies on a project basis or on retainer, providing a custom level of HR help designed for your business, with offices in Austin, San Antonio, Dallas and Houston. Contact me at Caroline@valentinehr.com or call (512) 420-8267.