UNITED STATES GOVERNMENT
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Division of Credit Practices
Thomas E. Kane
July 9, 1998
Carolann G. Hinkle, Esq.
Corbett & Kane
2000 Powell Street
Emeryville, CA 94608
- Re: Sections 603(d), 603(e) and 604(b)(3) of the Fair Credit
Dear Ms. Hinkle:
This is in response to your letter asking for a staff opinion
letter regarding the application of the Fair Credit Reporting
Act ("FCRA") to several employment situations. We have
reprinted your questions in italics below. Our staff opinions
in response follow.
1. When a consumer reporting agency ("CRA") verifies
prior employment, is it preparing an investigative consumer report?
Determining whether such verification constitutes an "investigative
consumer report" or simply a "consumer report"
requires an analysis of those two definitions in the FCRA, as
well as additional information about what would be involved in
the verification. Section 603(d) defines a "consumer report"
as any written, oral, or other communication of any information
by a consumer reporting agency bearing on a consumer's credit
worthiness, credit standing, credit capacity, character, general
reputation, personal characteristics, or mode of living which
is used or expected to be used or collected in whole or in part
for the purpose of serving as a factor in establishing the consumer's
eligibility for [one of the permissible purposes listed in Section
An "investigative consumer report" is defined as a
consumer report or portion thereof in which information on a consumer's
character, general reputation, personal characteristics, or mode
of living is obtained through personal interviews with neighbors,
friends, or associates of the consumer reported on or with others
with whom he is acquainted or who may have knowledge concerning
any such items of information. . . ..
An investigative consumer report is thus a type of consumer report
that includes information obtained during an "interview."
If a CRA simply checks facts stated on a job applicant's employment
application, such as asking a prior or current employer whether
an individual worked at the company during specific years, what
the individual's job titles were during the employment period,
and the individual's final salary, such fact-checking would not
constitute an interview. A CRA that produced for a potential employer
a report based on responses to these questions would be providing
a consumer report, but not an investigative consumer report. If,
on the other hand, the CRA employee asked the prior or current
employer to rate the individual's job performance or asked whether
the individual had ever been disciplined on the job or was terminated
for cause, such questioning would go beyond fact-checking and
would constitute an interview. A CRA that reported the responses
to these questions to a potential employer would be providing
an investigative consumer report.
You note that Section 603(d)(2)(A)(i) excludes from the definition
of "consumer report" "any report containing information
solely as to transactions or experiences between the consumer
and the person making the report." You also point out that
the Commission's "Statement of General Policy or Interpretation;
Commentary on the Fair Credit Reporting Act," 16 C.F.R. §
600 (1997), states that "[t]he exemption applies to reports
limited to transactions or experiences between the consumer and
the entity making the report (e.g., retail stores, hospitals,
present or former employers, banks . . .)." Comment
603(d)-7(A)(1) (emphasis added). You seem to
suggest that a CRA that produces a report based on its contacts
with former or current employers would not be producing a consumer
report at all because the information from the employers would
constitute the employers' transactions or experiences with the
job applicant. We disagree. Section 603(d)(2)(A)(i) excludes from
the definition of "consumer report" the communication
from the former or current employer to the CRA when it
involves only transactions between the consumer (the job applicant)
and the person making the report (the current or former employer).
The subsection does not exclude from the definition of "consumer
report" the communication from the CRA to the potential employer
because the transactions or experiences referred to in the communication
are not between the job applicant and the CRA.
2. When the CRA interviews former or current employers to
verify facts only, but the former or current employer voluntarily
provides additional information, including opinions, is the CRA
then preparing an "investigative consumer report"?
If a former or current employer goes beyond simple responses
to the CRA employee's fact-checking questions and offers opinions
or other unsolicited information, such as statements that the
individual had a drug habit or was reprimanded for poor job performance,
the conversation would become an interview for purposes of the
FCRA. Nonetheless, if the CRA does not include the opinions or
other unsolicited information in its consumer report, the consumer
report nonetheless would not be an investigative consumer report.
If, however, the CRA includes the opinions or other unsolicited
information in the report, the report would become an investigative
consumer report, despite the fact that the CRA did not originally
intend to obtain the information.
3. Before an employer makes an adverse employment decision
based on an investigative consumer report, must the employer provide
the applicant with a copy of the entire investigative consumer
Section 604(b)(3) states that, before an employer takes an adverse
action based on a consumer report, the employer must give the
consumer "a copy of the report" and a the summary of
consumer rights prescribed by the Commission. In your letter,
you state that, "[i]f a complete copy of the investigative
consumer report is provided to consumers, then former employers
as well as other interviewees may be hesitant to respond to CRA
inquiries." I have enclosed a copy of a staff opinion letter
(Hahn, 7/8/98) that responds to a similar inquiry,
and concludes that the section requires the employer to provide
a copy of the entire report.
The views set forth in this opinion are those of the staff, and
are not binding on the Commission.
Thomas E. Kane