The most frequent
misunderstanding about the FCRA comes about from interpreting sections independently rather than as a
whole. The fact that it is not
permissible to order or provide a consumer report except for a permissible
purpose does not help either. Part of
the confusion comes from trying to make one size fit all. The law, enacted by Congress many years ago,
was intended for credit purposes, but through various amendments has been
stretched to cover more people and issues.
As the FTC Commentary
reflects, in order to know if a report is a consumer report, or if the
investigator is a consumer reporting agency, “Sections 603 and 604 must be
construed together to determine what are permissible purposes . . ..” Per section 604, consumer reports may only
be procured for credit, employment and insurance underwriting purposes. It is unlawful to order a consumer report
for any other purpose. For example, no
one may order a consumer report when investigating an insurance claim. No one may order a consumer report for
pretrial or litigation support or for a background investigation unless the
purpose includes extension of credit.
But investigators
often read 603 by itself and jump to the conclusion that they are a consumer
reporting agency and their reports are consumer reports because they contain
information about the subject’s “ . . .character, general reputation, personal
characteristics or mode of living . . ..”
These definitions only apply
if the report is for a “permissible purpose.”
If the report is for investigation of an insurance claim, litigation,
non-employment background etc., then it is not
for a `permissible purpose,’ it is not
a consumer report and the investigator is not
a consumer reporting agency.
It is because
investigations of insurance claims, non-employment backgrounds and litigation
support (to name a few) are not covered by the FCRA that companies like
Choicepoint have painstakingly compiled databases from non-consumer report
information. In that way, the data
providers can sell the information to investigators and government agencies for
uses other than employment, credit or insurance underwriting.
Nearly every investigation
that touches on employment in any way, is covered by the FCRA. But section 603 defines employment purposes
as “ . . . evaluating a consumer for employment, promotion, reassignment or
retention as an employee.” Although a
work injury occurs during employment,
the FTC says that if the investigation is for the purpose of determining the
validity of the workers’ compensation claim, the report is not for one of the
above four definitions of employment purposes, and is not a consumer report.
Most
employment investigations require the employer to obtain the employee’s
permission in advance after making a separate notification of the
employee’s rights under the FCRA. One exception is a surveillance or
undercover where the report consists solely of the investigator’s observations
(603 (d)(2)(A)(i). This falls under an
exception for “transaction and experiences” which has recently been supported
by a federal court decision in Shane
Salazar v. Golden State Warriors, U.S.District Court, Northern District of
California, No. C 99-4825 CRB, November 9,2000.
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It is unlawful to mix
consumer report information and non-consumer report information in a
report. Moreover, if you subscribe to
an IRSG-type data provider, your User Agreements will specify the purposes for
which the information may be used. For
this reason, it is strongly recommended that investigators keep accurate logs
of all information purchased from the data providers so the records may easily
be audited to prove the information has been used properly.
Pre-employment
investigations or most other types of employment investigations are consumer
reports and the client must certify to the investigator that the employee’s
rights under the FCRA have been disclosed and the employee has provided written
permission for the employer to secure a consumer report. If the employer client (whether or not
represented by an attorney) takes adverse action against the employee based in
whole or in part on the information contained in the consumer report, the
employer is required to provide a complete copy of the report to the
employee. Although section 609 (a)(2)
says it is not necessary to reveal sources of information, the employer is
required to provide a complete,
unredacted copy of the report. Of
course, the report would be incomplete without disclosing the sources of
information. Hence the dilemma. Oral reports are covered too. It is unlawful for the employer not to
provide the disciplined employee with a complete copy of the report, written or
verbal.
An investigative
consumer report is merely one that contains information about the subject
derived from interviews with other persons.
All of the rules that apply to consumer reports also apply to
investigative consumer reports, along with a few more disclosure
requirements. Most of these affect the
employer rather than the consumer reporting agency, but the agency may not
report record information on things like arrests, indictments, convictions, tax
liens or outstanding judgments unless the information has been verified within
the last 30 days. The investigator must
make an effort to verify information adverse to the employee or be sure “the
person interviewed is the best possible source of the information.”
All investigators
need to know about the FCRA, whether their work makes them consumer reporting
agencies or not. A copy of the Act as
amended through 07-99 can be obtained at http://www.ftc.gov/os/statutes/fcra.htm. Investigators who do not keep separate logs
of information accessed and for what purpose, risk being unable to comply with
future audits of their files. In the
past, successful firms have nearly been put out of business by having to
laboriously search their files to prove proper use of information.
Write your congressional Representatives today and ask that they support and join as co-sponsors of HR 1543, the Civil Rights and Employee Investigation Clarification Act by Rep. Pete Sessions
Go to Legislative page at NCISS web site, www.nciss.org for a sample
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