Disclosure Forms: “Concise Explanation” Permissible

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On March 20, the Ninth Circuit Court of Appeals issued another must-read decision for employers as it relates to their disclosure and adverse action requirements under the Fair Credit Reporting Act (FCRA).

Disclosure Form Review

In this case, the court analyzed what language may be included on a disclosure form related to the “disclosure…that a consumer report may be obtained for employment purposes.” Relying in part on past opinions, including the much-discussed Gilberg case, the court found an employer may “describe what a ‘consumer report’ entails, how it will be ‘obtained,’ and for which type of ‘employment purposes’ it may be used.”
The court then reviewed the employer’s disclosure form to determine if the language met the “solely” requirement:
  • We [the employer] will obtain one or more consumer reports or investigative consumer reports (or both) about you for employment purposes. These purposes may include hiring, contract, assignment, promotion, reassignment, and termination. The reports will include information about your character, general reputation, personal characteristics, and mode of living.
    • For this paragraph, the court disagreed with the plaintiff’s claim that a mention of an investigative consumer report is impermissible finding that an investigative consumer report is a subcategory or specific type of consumer report and may thus be included on the disclosure form. However, the court did not address whether this paragraph satisfied the FCRA’s “clear and conspicuous” requirement.
  • We will obtain these reports through a consumer reporting agency. The consumer reporting agency is [Name]. [CRA’s] address is [address]. [CRA’s] telephone number is [telephone number]. [CRA’s] website is at [website].
To prepare the reports, [CRA] may investigate your education, work history, professional licenses and credentials, references, address history, social security number validity, right to work, criminal record, lawsuits, driving record and any other information with public or private information sources.
  • The court found these two paragraphs permissible as well as it provides helpful information about who will provide a consumer report to the employer and what private and public information may be examined to create a consumer report. Thus, this language did not violate the “solely” requirement. However, the court did not address whether these paragraphs satisfied the FCRA’s “clear and conspicuous” requirement.
  • You may inspect [CRA’s] files about you (in person, by mail, or by phone) by providing identification to [CRA]. If you do, [CRA] will provide you help to understand the files, including communication with trained personnel and an explanation of any codes. Another person may accompany you by providing identification.
If [CRA] obtains any information by interview, you have the right to obtain a complete and accurate disclosure of the scope and nature of the investigation performed.
  • While understanding that the information was provided by the employer to be helpful, the court determined this language should be provided in a separate document. Therefore, according to the court, this language violated the “solely” requirement.

Adverse Action Considerations

Next, the court discussed the employer’s pre-adverse action requirements. The plaintiff received a pre-adverse action letter on the employer’s behalf from the consumer reporting agency. While the pre-adverse action letter informed the plaintiff he could file a dispute with the CRA, there was no option or information included about how to discuss the report with the employer. Therefore, the plaintiff alleged the employer violated the FCRA’s adverse action requirements.
The court determined the FCRA’s language undermined the plaintiff’s argument as it specifically references that a consumer may dispute with the consumer reporting agency. Further, the court cited past cases and legislative history materials that indicate the right to dispute was crafted to help correct errors in consumer reports. Based on this analysis, the court determined the pre-adverse action letter did not violate the FCRA.