UNITED STATES GOVERNMENT
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
July 8, 1998
Mr. Douglas G. Hahn, President
2902 Evergreen Parkway
Evergreen, Colorado 80439
Re: Section 604(b)(3) and Section 609(a) of
the Fair Credit Reporting Act
Dear Mr. Hahn:
I am writing in response to your letter concerning the requirement
in Section 604(b)(3) of the amended Fair Credit Reporting Act
(FCRA) that any person intending to take an adverse employment
action, based in whole or in part on the contents of a consumer
report from a consumer reporting agency (CRA), must first provide
a "copy of the report" to the consumer.
You point out that an "investigative consumer report"
(such as a background investigation for employment purposes) is
a "consumer report" covered by this provision, and note
that Section 604(b)(3)(A) does not expressly permit the employer
to delete the identity of the sources of information used in preparing
investigative consumer reports before making the disclosure required
by Section 604(b). You express concern that employers who obtain
investigative consumer reports may have to disclose the entire
report, including the identity of sources. If this happens, you
believe that it may be difficult for consumer reporting agencies
such as your company to obtain information from former employers
or friends or associates of a consumer since you will not be able
to offer confidentiality to these sources. You ask for our views
as to what constitutes a "copy" of an investigative
consumer report for Section 604(b)(3)(A) purposes -- the complete
report (including sources) or a redacted version in which the
sources of information are deleted. We believe the section requires
the employer to provide the complete report.
The issue that you raise concerns the meaning of the term "copy
of the report" when used in Section 604(b)(3)(A). The term
is not defined in the FCRA. Therefore, unless a review of the
FCRA reveals a special meaning, the common definition of the term
(a mechanical reproduction of the report) should be used. Applying
the common definition, it is clear that when a standard consumer
report, such as a credit report or a criminal records check, is
the basis for an adverse action in the employment context, the
employer will have to provide a complete copy of the report. The
question is whether the result is any different in the case of
investigative consumer reports because of the special treatment
accorded "sources" in the two other provisions of the
FCRA -- Section 609(a) and Section 603(o) -- that explicitly discuss
the disclosure of "sources."
Section 609 sets forth the duties of CRAs when consumers request
the disclosure of information in CRA files. Subsection (a)(2)
specifically permits CRAs to delete the sources of investigative
consumer report information before making the disclosures required
by Section 609. This exemption was in the FCRA when it was first
passed and was not changed by Congress in the recent amendments
to the Act.(1) The fact that the
exemption remains in the FCRA is of some significance, since the
amendments otherwise increase the amount of information
that must be disclosed to consumers by CRAs pursuant to Section
609.(2) Thus, Congress protected
sources from disclosure at the same time that it broadened consumers'
rights to gain access to information.
Section 603(o) is an entirely new provision added by Congress
in the recent amendments. It exempts from the definition of "consumer
report" (and, thus, from coverage by the FCRA) certain communications
by employment agencies (the results of interviews with an applicant's
personal references) that would otherwise be investigative consumer
reports. In order for the exemption to apply, certain procedures
must be followed. Among these procedures is a disclosure that
parallels the disclosure required by Section 609. Significantly,
the subsection that mandates disclosure (603(o)(5)(C)) specifically
excludes from disclosure "sources of any information that
is acquired solely for use in making the communication and actually
used for no other purpose."
In contrast to the disclosures required by Section 609 (for CRAs,
when they provide file information to consumers) and Section 603
(for employment agencies, when they seek to exempt their communications
from the "consumer report" definition), the disclosure
required by Section 604 for employers, when they plan to take
adverse action, contains no exception for investigative sources.
The requirement of Section 604(b)(3)(A) that an employer must
provide a "copy of the report" to the consumer before
taking adverse action on it is unqualified. It is therefore our
opinion that an employer who redacts reference to investigative
sources in the copy of the report, prior to providing it to the
consumer, violates Section 604(b)(3)(A).
In order to reduce concerns about disclosure of sources, CRAs
such as your company may wish to provide employers with reports
that do not specifically identify sources. For example, instead
of stating that a specific individual working for a named company
provided an item of information, you may state that the information
came from a former employer without identifying either the individual
or the employer. Your clients may then release these reports to
consumers "as is" consistent with the requirements of
Section 604(b)(3) of the FCRA.
I hope that this information is helpful to you. The views expressed
herein are those of the staff and do not necessarily reflect the
views of the Commission or of any Commissioner.
Division of Credit Practices
1. The legislative history shows that
Congress included the "source" exemption in Section
609(a)(2) because of concern that a requirement to reveal sources
would make it difficult for con-sumer reporting agencies to obtain
information for investigative consumer reports. This history is
discussed in some detail in Retail Credit Company v. Dade
County, Florida, 393 F. Supp. 577, 580-582 (S.D. Fla. 1975).
2. Before the amendments became effective
in September of 1997, Section 609 required a CRA to disclose only
the "nature and substance of all information (except medical
information) in its files." Section 609(a)(2) now requires
disclosure of "all information in the consumer's file"
-- a disclosure that may be broader than the disclosure that Congress
now requires employers to make under Section 604(b)(3) (a "copy"
of the report relied upon by the employer).