Fair Credit Reporting Act
(FCRA) Section 615(a)(2)(B)
On February 8, 1999, we requested an FTC
Staff Opinion on the FCRA concerning whether
or not a Consumer Reporting Agency (CRA) can
render a hiring decision on behalf of a client
company.
BACKGROUND -- Several prospective clients
had asked us to perform their employee screening
and accompany the reports with an opinion, based
on their corporate guidelines, such that they would
receive a "hire" or "do not hire" decision in
addition to their reports.
Briefly, these prospective clients wanted to
outsource the work of (1) evaluating the reports we
obtained, and (2) making the "hire" or "do not hire"
decision based on their guidelines and policies.
CONCERN -- Specifically, we were concerned that
any employer, in their process of conforming to FCRA
procedures, still must be able to state in any adverse
action letter that we, the CRA, did not know "the
specific reasons why the adverse action was taken"
in the event that the decision was not to hire the
applicant.
FCRA STAFF OPINION -- On February 16, 2000,
we received our reply. The entire opinion letter is
on the FTC website at:
http://www.ftc.gov/os/statutes/fcra/allan2.htm
NOTE in particular:
"2. We do not believe that Section 615(a)(2)(B)
should be interpreted to prohibit CRAs from making
employment decisions for employers. The provision
is aimed exclusively at users of consumer reports,
requiring them to provide specific information to
consumers when they take adverse action. In crafting
the FCRA, Congress has included many provisions in
Sections 604-614 that forbid (or require) certain
specific acts by CRAs. In contrast, Section 615(a)(2)(B)
imposes no duties at all on CRAs. Rather, it requires in
the user's [ one of our client companies ] adverse
action notice a description of the usual sequence of
events, where a CRA provides a credit report
[ or other type of consumer report ] to a business client
and has nothing to do with the action taken by its
client. Please note that we are stating here only that
Section 615(a)(2)(B) should not be construed to
prohibit CRAs from making employment decisions on
behalf of employers, not commenting on the merits of
that practice."
[ Above brackets added for clarity. -- Web Editor ]
The FTC has always maintained that companies can
outsource work but not responsibility. In this case,
what they are saying is that having a CRA make
a hiring decision according to its client company's
guidelines is actually an action taken by the client
company.
Hence, if you are a prospective client company, and
want us to obtain your reports and make your hiring
decision for your staff according to a rigid specification
that you provide, we can now do that. However, you
still must follow FCRA procedures and issue your usual
adverse action letters when they are required.
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