There are new federal guidelines in place that will affect both job seekers and those companies looking to employ them – and they’ve come from an unlikely place. Unfortunately, we’re a month past the deadline and the transition hasn’t been fully made. Still, they’re relevant and can change the game for many job seekers, especially those concerned about their credit reports. Here’s what to expect.
Before the elections this past November, you may recall the Consumer Protection Financial Bureau, or CFPB, announcing that it would be making changes in the Federal Trade Commission’s regulations procedures. As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, those changes, once made, would be reissued and would also show the transfer of authority from the FTC to the CFPB. The CFPB provided new regulations for employers to begin using the CFPB’s notices (or forms substantially similar to them), in lieu of the notice from the FTC. Specifically, those forms are ones that all new job applicants and current employees are given by their employer to ensure compliance with the Fair Credit Reporting Act. And there was one more thing: even though there’s a transition period in place, employers were being strongly encouraged to begin the transition now.
The forms that are being updated are all used in the background screening process, and are required by the FCRA. They include:
SUMMARY OF YOUR RIGHTS UNDER THE FCRA
NOTICE TO USERS OF CONSUMER REPORTS: OBLIGATIONS OF USERS UNDER THE FCRA
NOTICE TO FURNISHERS OF INFORMATION: OBLIGATIONS OF FURNISHERS UNDER THE FCRA
Those employers that use third parties to provide these pre-employment background check reports for hiring and other employment purposes must comply with FCRA. They must also adhere to any specific state laws, just as they’ve done in the past. This is important for a lot of reasons, including the mandate that applicants and employees must be provided a notice of their rights under the FCRA in various situations, including:
- Providing these documents prior to taking an adverse action against an individual based on his or her background check report
- If it’s connection with the procurement of an investigative consumer report. If you’ve ever seen the “A Summary of Your Rights Under the Fair Credit Reporting Act”, it’s because other regulations were in place to satisfy this requirement. That hasn’t changed, but the logistics behind issuance and accountability has.
Making the Connection
Many are wondering what their ability to maintain payments on their credit cards has to do with being an upstanding employee. There are many justifications, but one member of Congress, who anticipated these changes as far back as last summer, shared this concerns with CFPB Director Richard Cordray. Tennessee Congressman Steve Cohen introduced H.R. 321, the Equal Employment for All Act, which would amend the Fair Credit Reporting Act to prohibit the use of consumer credit checks in relation to current and prospective employees for the purposes of deciding who to hire. His letter urged Cordray and his agency to not underestimate the power having access to an applicant’s credit report would give hiring managers. Remember, CFPB is now overseeing the three credit bureaus with more than $7 million in annual revenue.
His letter stressed the importance of overseeing how the credit checks are conducted, noting credit reports have “increasing importance in consumers’ lives because they are used in many kinds of lending, by landlords in renting a property and even as a way to screen job applicants”. He went on to reiterate the cycle of debt Americans are caught in and that very poignantly pointed out that many have “fallen into bad credit and as a result they cannot do what they need to do to climb out: find a job, work hard, pay their bills, and earn a better credit score”.
His bill would have provided “credit challenged” citizens, and in his letter he specified college students, low income families, minorities and senior citizens, an opportunity to rebuild their credit and that if employers decided not to hire an applicant because of his credit, it would begin a vicious cycle. He also stressed that many would find themselves taking risks with questionable companies waiting to prey on those looking for a way out with costly and illegal promises to “fix” their credit.
He also made the argument that one’s credit history plays no role on how well their perform their jobs and that there existed an obligation to not further complicate those efforts especially in a difficult economy, a weak job market and no significant signs of any kind of recovery. He reiterated his hopes that Cordray and CFPB would reconsider allowing employers to use consumer credit checks in their decision making processes.
That, of course, did not happen. Whether you are hired or promoted for a job will likely depend on the information that’s revealed in those background and credit checks. Not only that, but employers can also go through the process with their current employees. Volunteers aren’t off the hook either. This could open up legal problems as a long term employee who have provided consistent work products for years could find themselves without a job because of financial difficulties that resulted in hits to their credit histories. The justification is that screening is required by federal or state law, along with a new emphasis being placed on security and safety.
Still, as mentioned, the CFPB website has yet to be revised. The new law went into effect last month. Instead, the website points visitors to the same FTC information that’s been available for years. Not only that, but the notices have yet to be revised, either. Many are wondering if the new shine is beginning to tarnish the consumer watchdog agency. As a result, the official CFPB stand is that employers should continue to use the forms it already has as the transition continues. For many, they have already put the new dynamics into place so that once that transition is made, they can complete that seamless transition.
For those who this will affect the most – the ones whose credit scores might work against them, it would seem that a letter from a Tennessee politician, dated last summer, is the only memorialization of how it could ultimately play out.
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