LITIGATION UPDATE: FCRA Violations of the “Stand Alone” Requirement

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Over the past several years, there has been a considerable increase in litigation over alleged violations of the Fair Credit Reporting Act (FCRA). These lawsuits, often class action in nature, can cost the defendant millions of dollars in settlements and attorneys’ fees, not to mention lengthy legal battles that can last years.
One of the primary reasons employers are sued under the FCRA is the language on the disclosure form. The FCRA clearly outlines that employers cannot procure a consumer report employment purposes unless “a clear a conspicuous disclosure has been made in writing…in a document that consists solely of the disclosure.” In addition to signing the disclosure, the consumer must also authorize, in writing, the procurement of a consumer report.
Although the FCRA does allow the disclosure and authorization to be on the same page, courts have enforced the standalone requirement by cracking down on companies who include extraneous information such as waiver of liability language, company policy information, criminal history questions, notice that adverse action will be taken and other miscellaneous information. At issue is the potential to overwhelm applicants with information that could distract them from understanding the forms they are signing. Although the federal requirements have not changed, plaintiff attorneys are getting more creative in their arguments. Employers should work with qualified legal counsel for a thorough review of their disclosure and authorization form. 
Need help justifying the expense of hiring experienced counsel? Look no further than two recent examples that cost companies dearly. In a recent example from April 2018, a nationwide snack provider reached a $2.4 million class action settlement. The lawsuit alleged the employer included extra information on the disclosure such as a notice documents would be photocopied and an assurance that responses to information were correct.
Similarly, in March 2018, a membership-only warehouse chain agreed to pay nearly $2.5 million to end an FCRA class action lawsuit alleging use of non-compliant disclosure forms. At particular issue was inclusion of language pertaining to the sources from which information would be gathered (i.e., law enforcement agency, school, employer, etc.).[1]
These recent lawsuits are just two examples of the high fiscal stakes companies could face for non-compliance with the disclosure requirements. Notably these lawsuits are not limited to large, nationwide organizations. Small to midsize employers are also being targeted for significant amounts of money. It’s important for employers to take action now and review their forms. For additional educational information on complying with the FCRA, visit the Federal Trade Commission website.
[1] In both settlements it is important to note the employers denied all liability and no court found them to have violated the law in any way.