UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Division of Credit Practices
December 18, 1997
Harold R. Hawkey, Esq.
Employers Association of New Jersey
799 Bloomfield Avenue
Verona, New Jersey 07044-1399
- Re: Sections 604(b)(2), 604(b)(3), 606, and 615(a) of the
Fair Credit Reporting Act
Dear Mr. Hawkey:
This responds to your letters of June 27, 1997, and July 11,
1997, concerning the obligations of employers to consumers (applicants
for jobs or current employees) under a number of the provisions
of the Fair Credit Reporting Act (FCRA) as recently amended by
Congress. The amendments went into effect on September 30, 1997.
1. Disclosure Requirements Of Section 604(b)(2) And Section
The first issues that you raise in your June 27 letter concern
the relationship of Section 604(b)(2), which sets out disclosures
required of parties who procure consumer reports for employment
purposes, to Section 606, which provides special procedures that
must be followed when "investigative consumer reports"
are requested. Section 604(b) is a general provision that applies
to all employers who use consumer reports. Section 606 applies
only to employers who obtain a special type of consumer report
called an "investigative consumer report." An "investigative
consumer report" is defined by Section 603(e) as a consumer
report in which information is gathered by interviews with a consumer's
neighbors, friends, or others who have knowledge of the consumer.
The information gathered must involve a consumer's character,
general reputation, personal characteristics, or mode of living.
Concerning the timing of the disclosures, you note that
Sections 604(b)(2)(A) and 606(a)(1) set forth different time frames,
the former being "any time before the report is procured"
and the latter being "not later than three days after the
date on which the (investigative) report was first requested."
You state your belief that the terminology used (the report "may
be obtained" in Section 604(b)(2)(A) or "may be made"
in Section 606(a)(1)) is clumsy, especially in the case of an
investigative consumer report disclosure already ordered within
the prior three days. You ask, "What is the latest point
at which disclosure may be made?"
In our view, the Section 604(b) disclosure must be made before
any consumer report -- including an investigative consumer report
-- is requested for employment purposes. The Section 606 disclosure
may be made up to three days after the request.(1)
The "may be made" terminology is designed to allow the
report user to make either or both of those disclosures at any
time prior to the required date.
Concerning the form of the disclosures, you quote Section
604(b)(2)(A)'s requirement that the disclosure mandated by this
section be made in a "document that consists solely of the
disclosure" and ask whether the practice that is currently
common in the industry -- including in the employment application
a provision in which the employer discloses that a consumer report
may be requested and obtains the consumer's written consent --
may continue now that the amendments have gone into effect. In
our view, an employer may continue to include in the employment
application a disclosure that a consumer report may be procured
and provide a place for the consumer's written consent.(2) However, an employer that follows this
procedure must also clearly and conspicuously disclose in a completely
separate document that a consumer report may be obtained
for employment purposes, as required by Section 604(b)(2)(A).(3)
2. Actions Required By Section 604(b)(3) Before Adverse
Action Is Taken, And By Section 615(a) After Adverse Action Is
The other issues raised in your letters concern (1) Section 604(b)(3),
which requires an employer, before taking "any adverse action
based in whole or in part on [a consumer] report," to provide
to the affected consumer a copy of the report and a description
in writing of the consumer's rights under the FCRA; and (2) Section
615(a), which requires certain disclosures to be made after adverse
action is taken by any report user.
Your June 27 letter asks how the process of making disclosures
before taking adverse action will work in the real world, since
employment decisions often involve nothing more than a "yes/no"
mental process. In this regard, Section 604(b)(3) must be read
in connection with Section 615(a), which requires all those who
use consumer reports to provide consumers with an adverse action
notice that contains specific information whenever an adverse
action is taken based in whole or in part on a consumer report.
Employers must comply with both Section 604(b)(3) and Section
615(a), which require disclosures at different times in the hiring
process. Section 604(b)(3) requires a disclosure that can be thought
of as a "pre-adverse action disclosure." It must be
made before the adverse action is taken.(4)
The Section 615(a) notice, which is the actual "adverse action
notice," must be provided after the adverse employment
decision is made.
The wording of Section 604(b) and its relation to Section 615(a)
mandate that some period of time elapse between the pre-adverse
action disclosure and the employment action that triggers the
Section 615(a) adverse action notice. The law, however, does not
set forth what specific procedures must be followed by employers.
For example, the law is silent as to how long the employer must
wait after making the Section 604(b) pre-adverse action disclosure
before actually taking adverse action. Employers may wish to consult
with their counsel so that they develop procedures that are appropriate,
keeping in mind the clear purpose of the provision to allow consumers
to discuss reports with employers or otherwise respond before
adverse action is taken.
Finally, your July 11 letter raises two issues relating to ministerial
provisions of Section 604(b) and 615(a). First, you point
to the requirement in Section 615(a) that the consumer be informed
of his or her right to obtain a copy of the consumer report from
the reporting agency when any adverse action is taken. You question
whether this makes any sense in light of the fact that the consumer
has already received, as required by Section 604(b)(3), a copy
of the actual report relied upon in any employment decision. As
we have stated in the attached staff opinion letter (Weisberg,
6/27/97),(5) an employer must comply
with all the requirements but, in order to minimize confusion
on the part of consumers, may note in the Section 615(a) notice
that the consumer has already received a copy of his or her report
and the summary of consumer rights.
Second, you ask why Section 604(b) requires employers
to distribute the FTC-prescribed summary of consumer rights under
the FCRA as part of the pre-adverse action disclosure when Section
609(c) requires CRAs to provide the summary to consumers. We believe
that Congress required employers to include the summary of rights
in the pre-adverse action disclosure along with a copy of the
consumer report so that consumers would be fully informed of their
rights. Some consumers who receive this disclosure will not request
a copy of their report from the CRA. Without the Section 604(b)
disclosure, these consumers might never receive the summary of
The above views constitute informal staff opinions and are advisory
in nature and not binding upon the Commission. We hope that the
foregoing discussion will be helpful.
Division of Credit Practices
1. In the case of employment, the investigative
consumer report disclosure may only be made after the report is
requested if a Section 604(b) disclosure that a consumer report
may be obtained has been made before the investigative
report is requested and the consumer has provided authorization.
2. This is one way of complying with
the separate requirement of Section 604(b)(2)(B) that the consumer
authorize the procedure in writing.
3. Nothing else may appear on the document
that detracts from the disclosure required by Section 604(b)(2)(A).
An employer may elect to obtain the consumer's authorization on
that document, because that would focus the consumer's attention
on the disclosure and thus further the purpose intended by the
"separate document" provision of this section. See attached
staff opinion letter (Steer, 10/21/97).
4. It must include (1) the consumer
report used by the employer, and (2) a description of consumer
rights under the FCRA as prescribed by the Commission (to be provided
to the employer by the consumer reporting agency that provides
the consumer report).
5. As discussed in that letter, the
duplication may have some logical basis. Congress intended for
consumers to be able to obtain a second copy of their reports
when adverse actions are taken in employment situations. Section
615(a)(3)(A) gives each consumer the right to a free report for
60 days after an adverse action. The fact that a rejected applicant
receives a copy of the report before the adverse action is taken
(as required by Section 604(b)) does not negate his or her right
to another free disclosure for a full two-month period. This is
a significant benefit because credit files routinely change over