FTC FACTS for Business
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Using Consumer Reports:
What Employers Need To Know
A s an employer, you may use consumer reports when you hire new employees
and when you evaluate employees for promotion, reassignment, and retention
— as long as you comply with the Fair Credit Reporting Act (FCRA). Sections 604, 606,
and 615 of the FCRA spell out your responsibilities when using consumer reports for
employment purposes.
•	 Your	advertisement	for	cashiers	
nets	100	applications.	You	want	
credit	reports	on	each	applicant.	
You	plan	to	eliminate	those	with	
poor	credit	histories.	What	are	
your	obligations?
• You	are	considering	a	number	of	
your	long-term	employees	for	major	
promotions.	Can	you	check	their	
credit	reports	to	ensure	that	only	
financially	responsible	individuals	
are	considered?
• A	job	candidate	has	authorized	you	to	
obtain	a	credit	report.	The	applicant	has	
a	poor	credit	history.	Although	the	credit	
history	is	considered	a	negative	factor,	it’s	
the	applicant’s	lack	of	relevant	experience	
that’s	more	important	to	you.	You	turn	
down	the	application.	What	procedures	
must	you	follow?
Facts for Business
The FCRA is designed primarily to protect
the privacy of consumer report information
and to guarantee that the information supplied
by consumer reporting agencies is as accurate
as possible. Amendments to the FCRA
— which went into effect September 30, 1997
— significantly increase the legal obligations of
employers who use consumer reports. Congress
expanded employer responsibilities because of
concern that inaccurate or incomplete consumer
reports could cause applicants to be denied jobs
or cause employees to be denied promotions
unjustly. The amendments ensure (1) that
individuals are aware that consumer reports may
be used for employment purposes and agree to
such use, and (2) that individuals are notified
promptly if information in a consumer report may
result in a negative employment decision.
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