UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
December 10, 1998
Barry J. Nadell, President
InfoLink Screening Services, Inc.
17609 Ventura Blvd., Suite 210
Encino, CA 91316
Re: Section 605(a) of the Fair Credit Reporting
Act
Dear Mr. Nadell:
This is in response to your letter requesting the staff's views
on a number of issues relating to the length of time that a consumer
reporting agency ("CRA") may report "adverse"
items of information under Section 605(a) of the Fair Credit Reporting
Act ("FCRA").
We note that there has been a significant change in Section 605(a)
of the FCRA since you wrote your letter. The "Consumer Reporting
Clarification Act of 1998" (Senate Bill 2561, Pub. L. No.
105-347) ("CRCA"), which was signed into law by President
Clinton on November 2, 1998, amended the FCRA by, inter
alia, removing all restrictions in Section 605(a) on the
reporting of criminal convictions by CRAs. Prior to the CRCA,
convictions could in most cases be reported only for seven years
(the general reporting period in Section 605(a) for non-bankruptcy
items of adverse information); as a result of the CRCA, criminal
convictions may now be reported regardless of the length of time
that the conviction antedates the report. Our responses to your
questions (summarized in italics below) incorporate this recent
change in the FCRA.
1. What are the responsibilities of a CRA when an employer
asks the CRA to check an applicant or employee's educational record
(dates of graduation, degrees granted to the individual, etc.)?
Your first question relates in part to our staff opinion letter
to Mr. Seham (April 17, 1998). Mr. Seham asked whether the seven-year
time limits in Section 605(a) of the FCRA apply to the situation
where a CRA verifies an applicant or employee's educational background
and past employment. In our letter to Mr. Seham, we explained
that the staff of the Commission does not consider graduation
dates, college degrees, or dates of employment to be items of
"adverse information." Since Section 605 limits only
the reporting of "adverse items" of information, we
stated that, in our view, there is no restriction upon the reporting
of this type of information even if the information antedates
the report by more than seven years.
Your inquiry asks whether we would change our analysis if an
applicant falsifies his or her educational or employment background,
and, thus, the information being reported by the CRA is, in fact,
"adverse" to the interests of the consumer in the sense
that it contradicts information provided by the applicant.
We would not change our analysis. We believe that whether information
is "adverse" for FCRA purposes depends upon the nature
of the information and not the use of the information. For example,
tax liens, payment delinquencies, evictions, and similar information
are clearly items of negative information that reflect adversely
upon the consumer. However, dates of employment and educational
data (such as dates of graduation and degrees) are neither "positive"
nor "negative." The information is neutral.
We believe that facially neutral information should not be considered
"adverse" information because a consumer may have misrepresented
the information. To take the contrary position would prohibit
a CRA from performing a valuable function for its clients -- verifying
employment or education data beyond seven years -- without furthering
any of the goals of Section 605 of the FCRA. Accordingly, we believe
that a CRA may verify education information and employment dates
even where the information it provides to its customers may contradict
what a consumer has listed on his or her application.
We note that if there is any mistake in the information provided
by the CRA to an employer concerning a consumer's educational
background or employment history, the consumer will learn about
the information before any adverse action is taken by the employer.
Section 604(b)(3) requires the employer to provide a copy of the
consumer report containing the data about education and employment
before taking any adverse employment action. Thus, if the CRA
has made a mistake, the consumer will be able to point this out
to the employer.
2. What are the responsibilities of a CRA if, when checking
past employment information, adverse items of information are
discovered that antedate the report by more than seven years?
With certain exceptions,(1) CRAs
may not report information that they uncover if the information
antedates the report by more than seven years. We note, however,
that Section 605(b)(3) exempts from the general seven-year limitation
the reporting of any information in connection with employment
at an annual salary "which equals, or which may reasonably
be expected to equal $75,000, or more." Thus, in the case
of applicants for high income jobs, a CRA may report adverse information
without any time limitation.(2)
Obviously, Section 605(a) limits the reporting of many items
of negative information by a CRA except where a high-salary position
is involved. However, we note that checks with past employers
are not covered by the FCRA when done directly by the employer.
Thus, the employer may obtain adverse information about the consumer
without being concerned about Section 605(a). Finally, we note
that employment agencies that interview references provided by
an applicant are covered by a special provision of the FCRA (Section
603(o)) and also are not bound by the reporting limitations set
out in Section 605.
3. If an employment application asks whether or not an applicant
has been convicted of a crime, may a CRA verify this information?
Should the application be reworded? Some federal and state laws
and regulations require criminal records checks covering time
periods in excess of seven years. May CRAs assist in these checks?
The FCRA has never prohibited an employer from asking about criminal
convictions in an employment application. Moreover, because of
the recent amendment to Section 605(a) contained in the CRCA,
consumer reporting agencies may now report information about criminal
convictions without any limitation as to length of time that they
antedate the report. As a result, CRAs may now be used by an employer
to conduct comprehensive checks of the criminal histories of job
applicants or employees.
I hope that this information is of assistance to you. The opinions
set forth in this letter reflect the views of the staff and not
necessarily those of the Commission or any individual Commissioner.
Sincerely,
William Haynes
Attorney
Division of Financial Practices
1. The exceptions are criminal convictions
(which may now be reported without any time limit), bankruptcies
(which may be reported for ten years), and civil suits and judgments
(which may be reported for seven years or until the relevant statute
of limitation expires).
2. Since your question concerns information
apparently obtained through interviews with former employees,
we note that these inquiries may be "investigative consumer
reports" subject to the special procedures set forth in Section
606 of the FCRA.
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