UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Division of Financial Practices
Clarke W. Brinckerhoff
March 25, 1999
Mr. Kenneth M. Willner
Paul, Hastings, Janofsky & Walker
1299 Pennsylvania Ave. N.W.
Washington, DC 20004-2400
|Sections 603(e), 604(b)(2)(A),
606(a) and 606(b) of the Fair Credit Reporting Act
Dear Mr. Willner:
This is in response to your letter requesting a staff opinion
regarding the Fair Credit Reporting Act ("FCRA"). Your
questions involve background checks of job applicants, undertaken
for employers by third party agencies. The agencies generally
conduct telephone interviews with between two and five references
for each applicant, in which they inquire about the applicant's
prior work performance. We set forth your questions verbatim,
with our analysis immediately following.
1. If an employer uses a third-party agency to conduct a
reference check on an applicant, is the reference check considered
a "consumer report" (or) an "investigative consumer
We believe that the reference checks which you describe constitute
investigative consumer reports as that term is defined in Section
603(e) of the FCRA. A full discussion of our position is presented
in the attached letters. (Hinkle,
7/9/98; Beaudette, 6/9/98)
2. If a reference check by a third-party is considered an
"investigative consumer report," can the employer combine
the information regarding the "nature and scope of the investigation"
with the initial disclosure that an "investigative consumer
report" may be obtained?
There are three separate disclosures to consider. First,
Section 606(a) requires any user of an investigative consumer
report to disclose that such a report may be requested, no later
than three days after ordering such a report. Second,
Section 606(b) requires the report user to disclose the "nature
and scope of the investigation requested" upon request by
the consumer, no later than five days after receiving the request
(or five days after ordering the report, if that is later). Third,
Section 604(b)(2)(A), which applies only to employers but includes
all types of consumer reports (including, but not limited to,
investigative reports), requires a disclosure "in a document
that consists solely of the disclosure" that a consumer report
may be obtained for employment purposes.
We believe that employers may combine the disclosures required
by Section 606(b) relating to the "nature and scope of the
investigation" with the initial disclosure that an investigative
consumer report may be obtained required by Section 606(a), in
those cases where the employer is able to describe with sufficient
particularity the nature and scope of any such investigation that
might be requested in the future. Where an employer cannot do
so at that point in time (e.g., there are too many alternative
types of investigations that it might possibly order at the time
of the initial disclosure), it will not be able to comply with
Section 606(b) until the parameters of the investigation have
been determined or the report has been ordered.
Section 604(b)(2)(A)'s requirement that the disclosure by employers
of any consumer report (investigative or other) be in a stand-alone
document raises the issue of what (if any) other items may be
included on that document. In the enclosed letter (Steer, 10/21/97), the staff explained that the
intent of this provision is to insure that the disclosure appears
conspicuously in a document unencumbered by other information.
In the Steer letter, we opined that the employer could
also include the authorization required by Section 604(b)(2)(B),
because the authorization would contain limited verbiage and would
enhance the Section 604(b)(2)(A) disclosure, rather than detract
from it. We believe that a limited Section 606(a) disclosure would
also be permissible, on the same theory. For example:
A consumer report may be obtained on you for employment purposes.
It may be an "investigative consumer report" that
includes information as to your character, general reputation,
personal characteristics and mode of living.(1)
You have a right to request disclosure of the nature and scope
of the report, which involves personal interviews with sources
such as your neighbors, friends, or associates.
The first sentence (the general consumer report disclosure for
employers) sets forth the disclosure without elaboration, and
the second and third sentences (the initial investigative consumer
report disclosure(2)) are sufficiently
brief and in accord with the first sentence that we would consider
it as emphasizing the Section 604(b)(2)(A) disclosure, and thus
be permissible under that section on the theory set forth in the
Steer letter. However, a Section 606(b) notice setting
forth the nature and scope of the investigation would of necessity
be much more detailed and would likely be held to overshadow 604(b)
disclosure in violation of 604(b)(2)(A). Therefore, we believe
that an employer may combine only a very limited Section 606(a)
notice with the general Section 604(b)(2)(A) notice without running
afoul of the latter section's requirement that the required disclosure
be in a stand-alone document. The surest way for an employer to
comply, of course, would be to provide the Section 604(b)(2)(A)
notice and the Section 606 notice in separate documents.
3. If a reference check by a third party agency is not considered
a "consumer report" or an "investigative consumer
report," are there other FCRA requirements of which we should
Your clients are concerned that disclosure to an applicant of
the names of references with their comments will have a chilling
effect on the provision of honest references by former employers.
While we recognize that concern, we believe that the clear language
of Section 604(b)(3) requires that an employer who intends to
take an adverse employment action based on a consumer report must
first provide to the consumer a "copy" of the report.
Accordingly, we believe a copy of the complete report must be
made available. This issue is discussed in more detail in the
attached letter (Hahn, 7/8/98).
The opinions set forth in this informal staff letter are not
binding on the Commission.
Clarke W. Brinckerhoff
1. The notice should include whichever
are applicable, and exclude others.
2. See Federal Trade Commission
Commentary on the Fair Credit Reporting Act, comment 606-6. 16
C.F.R. Part 600 Appendix; 55 Fed. Reg. 18,804, 18,819 (May 4,