STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
of Credit Practices
Bureau of Consumer Protection
Clarke W. Brinckerhoff
September 9, 1998
H. Rowan Leathers, III, Esq.
MANIER & HEROD
First Union Tower - Suite 2200
150 Fourth Avenue North
Nashville, Tennessee 37219
Re: Sections 603(d), 603(f),
and 604(b) of the Fair Credit Reporting Act
Dear Mr. Leathers:
This responds to your letter dated concerning
the application of the Fair Credit Reporting Act ("FCRA")
to Employment Trac ("ET"), your client. ET provides
information to prospective employers about the prior work experience
of applicants, primarily in the fast food industry. ET provides
the information telephonically (i.e., without a written
report) on a specific applicant upon request from a subscriber
to this service.
You ask three questions, which we report
verbatim preceding our analysis of each.
1. Is ET's provision of this type of
information subject to the FCRA?
Yes. ET is a "consumer reporting agency"
("CRA") because Section 603(f) defines that term to
include any party that "for monetary fees . . . regularly
engages in . . . assembling . . . information on consumers for
the purpose of furnishing consumer reports to third parties"
in interstate commerce. Each report on an employment applicant
is a "consumer report" because Section 603(d) defines
that term very broadly to include any information bearing on a
consumer's credit standing, "character, general reputation,
personal characteristics, or mode of living" which is used
(among other things) to make employment decisions. An individual's
employment history, based on data in ET's files, unquestionably
bears on his or her character, reputation, and other listed characteristics.
2. Section 604(b)(2)(A) of the FCRA
seems to require that the consumer disclosure be "in a document
that consists solely of the disclosure." With regard to this
requirement, is it sufficient that the disclosure be prominently
set forth within an application for employment, or must it truly
be included on a separate document?
The disclosure may not be part of an employment
application, because the language you quote is intended to ensure
that it appears conspicuously in a document not encumbered by
any other information. The reason for requiring that the disclosure
be in a stand-alone document is to prevent consumers from being
distracted by other information side-by-side with the disclosure.
A disclosure that is combined with many items in an employment
application -- no matter how "prominently" it appears
-- is not "in a document that consists solely of the disclosure"
as required by Section 604(b)(2)(A).
3. Section 604(b)(3)(A) of the FCRA
requires that a copy of the "report" be provided by
the user to the consumer prior to adverse employment action being
taken based in whole or in part on the report. In this instance,
the report provided to the user is a verbal report, and not a
written report. We would appreciate some guidance concerning how
to provide a "copy of the report" within the context
of this transaction.
The purpose of this section, which was
added in the 1996 amendments to the FCRA, is to provide the consumer
with knowledge of information the CRA has reported about him or
her that is going to result in adverse action in an employment
context, affording the individual an opportunity to respond to
it.(1) Where a written report exists,
as in the case of a traditional consumer report, Section 604(b)(3)(A)
requires that the actual unexpurgated report must be provided
to the applicant.(2) Where the
employer possesses no written report because the information is
provided verbally, as in ET's business, we believe it the employer
may comply with Section 604(b)(3)(A) by telling the applicant
orally what is in the report before taking adverse action. Because
the report itself is oral, an oral "copy" seems the
proper method of compliance. An employer that verbally provides
to the applicant the report it receives (and informs him or her
that ET is the source of the report), before rejecting the application,
complies with the provision by conveying information that Congress
intended the consumer to know prior to suffering adverse action.
The opinions set forth in this informal
staff letter are not binding on the Commission.
Clarke W. Brinckerhoff
1. S. Rept. 104-184,
104th Cong., 1st Sess. 35.
2. The enclosed
staff opinion letter (Hahn, 7/8/98) discusses this subsection
in that regard.