FTC Issues Report: "Forty Years of Experience with the Fair Credit Reporting Act"

The Federal Trade Commission today issued a staff report, that compiles and updates the agency’s guidance on the Fair Credit Reporting Act (FCRA), the 1970 law designed to protect the privacy of credit report information and ensure that the information supplied by credit reporting agencies is as accurate as possible. A credit report contains information about a consumer’s personal and credit characteristics, character, and general reputation and is used to make credit, employment, insurance and other decisions.

"The employment screening rules and regulations continue to change and this will have an impact on our industry" says Bill Whitford, CEO of S2verify, LLC.

The new staff report, entitled “Forty Years of Experience with the Fair Credit Reporting Act: An FTC Staff Report and Summary of Interpretations,” provides a brief overview of the FTC’s role in enforcing and interpreting the FCRA and includes a section-by-section summary of the agency’s interpretations of the Act.

The FTC is also withdrawing the agency’s 1990 Commentary on the FCRA, which has become partially obsolete since it was issued 21 years ago. The 1990 Commentary was comprised of a series of FTC statements about how it would enforce the various provisions of the FCRA. Since 1990, the FRCA has been updated several times, most significantly by the Consumer Credit Reporting Reform Act of 1996 and the Fair and Accurate Credit Transactions Act of 2003, known as the FACT Act. Both updates expanded the provisions of the FCRA.

The new staff report deletes several FTC interpretations in the 1990 Commentary that have since been repealed, amended, or have become obsolete or outdated. It also modifies some interpretations in the 1990 Commentary, and adds several interpretations reflecting changes that Congress has made to the FCRA over the years, rules issued by the FTC and other agencies under the FACT Act, statements in numerous staff opinion letters, and the staff’s experience from significant enforcement actions.

Recent legislation has transferred the authority to issue interpretive guidance under the FCRA to the Consumer Financial Protection Bureau (CFP. Withdrawing the 1990 Commentary now will ensure that this obsolete document does not transfer to the CFPB.


The Commission vote approving the staff report on the FCRA and withdrawing the 1990 Commentary was 5-0. The report and Federal Register notice can be found on the FTC’s website and as links to this press release. More information for consumers about the FRCA can be found here.

Weakening Job Market

Rise in unemployment applications indicates weakening job market

by Vanessa Bostwick on June 23, 2011

Nowhere is the fickle economy more evident than in the unstable job numbers, in which an economic snapshot takes shape when jobs data is analyzed, only to change again the following month after a round of fresh data is released.
Another sign of an increasingly weak job market came today, when it was announced that last week the number of people who applied for unemployment benefits climbed by the most in a month.
The Labor Dept. said that unemployment applications rose by 9,000 to a seasonally adjusted 429,000, the second increase in three weeks and the 11th straight week that applications have been above 400,000.
The four-week average for unemployment benefit applications was unchanged at 426,250 last week.
Applications dropped below 400,000 in February and stayed this way for seven of the following nine weeks.
The Washington Post reports that the economy needs to generate at least 125,000 jobs per month just to keep up with population growth. And at least twice that many jobs are needed to bring down the unemployment rate, which rose to 9.1 percent in May.

“We need initial claims to fall back below 400,000 to signal stronger economic growth than the area we seem to be mired in,” analysts John Ryding and Conrad DeQuadros at RDQ told the Post.

Company Settles "Class Action Lawsuit" for $4.3 million

The company failed to follow the Fair Credit Reporting Act (FCRA) by first obtaining written consent to conduct background checks and second they failed to offer the applicants a copy of their report or the Credit Reporting Agency's (CRA) contact information to obtain a copy.

The proposed settlement would pay the worker that was terminated because of a background check between $2,000 and $4,000 each.

This company was a subcontractor to a large metropolitan school district and provided transportation for children. 

Maybe it is time for you to reevaluate how you perform your employment screening, your consent, and how you notify your applicants of the outcome.  In addition, you should understand what your current CRA is providing and how it is impacted by the FCRA and State Laws.

Recently, we were preparing a consent for a new client.  After reviewing several Fortune 500 companies existing consents, we found NONE of them were in compliance with both the FCRA and the state regulations.  

Companies need to understand that these types of lawsuits and actions by the Federal Trade Commission over violations of the FCRA and state regulations will continue.

The Meaning of Service

I often wonder why we as individuals tolerate companies that lack the basic skills of customer service. Why do we continue to use a company even after having a bad experience?   Maybe it's because we are simply to forgiving.   Maybe it's because we just don't want the hassle of moving our business.

Recently we have been growing and have had to look at alternative internet providers. Our current provider has the fastest speed, but the problem is that it is down 40% of the time.   So we had a T1 installed, and my partner, who has been dealing with the mess, was on the phone for over an hour.  He sent an email and the new provider and the response was "Thank you we will get back with you in 72 hours." What in the world are these people thinking?

However, we have had a great experience with Clear. This is not an advertisement for their product, but a confirmation of their service. Now their product is really good. But let me tell you about our experience.  

One day when our service was down, I went by the mall to get an additional router from "Clear."  The sales person went above and beyond the call of duty. I needed  a another router that day, so he gave me a loner until our new router arrived. Also, when we were installing the router, we had some issues. So what did the salesperson do?  He came to our office and installed the router.  It would be a great story if it stopped there, but it does not.  He came back when we got the new router and installed it as well.

The meaning of "Service"  to me is meeting or exceeding the customers expectations.   This is something that we strive to achieve at S2Verify. Not only for our clients, but for the applicants and consumers as well.   Clearly we can take a lesson from our friend at "Clear."  

Absolutely an outstanding customer service experience.

How to Stimulate the Economy and Create Jobs

With the recent recession and all the hard times of many American's, there has been a lot of movement by local states and the EEOC to ban credit checks for employment purposes.   Statistically, credit checks are not used very often for the mass number of background checks performed.   In fact, only 13% of  companies  perform credit checks on all their applicants.  

Also, there is no correlating data that suggest a bad credit score is an indication that someone will steal from the company.   That being said, I am still shocked that the average person doesn't realize that employee theft is a serious problem.
Consider statistics from the American Society of Employers:

• Businesses lose 20% of every dollar to employee theft.
• 20% of employees are aware of fraud at their companies (including theft of office items, false claims of hours worked, and inflated expense accounts).
• The average time it takes for an employer to catch a fraud scheme is 18 months.
• 55% of perpetrators are managers.
• 44% of workers say their companies could do more to reduce fraud.
• The U.S. Retail Industry loses $53.6 Billion a year due to employee theft.
• 60% of companies have staff trained to deal with fraud and ethics issues (up from 30% in 2000).

The U.S. Chamber of Commerce estimates that 75% of all employees steal at least once, and that half of these steal again and again. The Chamber also reports that one of every three business failures are the direct result of employee theft.

Also, 30% of businesses fail due to employee theft.   This is a serious problem for our economy and jobs. In fact, most small companies do not perform  employment screening.  Background Screening could stop a lot of loses and improve business and hiring. Imagine if those 30% of businesses continued to operate and hired employees. 

Massachusetts Bars Employers from Requesting Criminal History from Applicants

Massachusetts becomes the second state to bar both the public and private employers from requesting applicants to disclose criminal history information.    Effective November 4, 2010, both public and private employers from requesting that job applicants disclose criminal history information on an initial job application (also known as “Ban the Box” legislation). 

Massachusetts follows Hawaii, who in 1998 was the first state to prohibit employers from inquiring about an individuals criminal record.  However, unlike Hawaii, Massachusetts  does not prohibit an employer from questioning an applicant about a criminal record during the interview process or requesting a pre-offer background screening;(though inquiries about arrests that do not lead to a conviction or inquiries about certain misdemeanors such as public drunkenness, simple assault, minor traffic violations and disturbing the peace are prohibited).

The Massachusetts law does provide for two important exceptions to the prohibition requesting applicants disclose criminal records on job applications.  An employer may request criminal record information on a job application if:  (1)  the applicant is applying for a position for which a federal or state law or regulation creates a mandatory or presumptive disqualification based on a conviction of certain criminal offenses; or (2) the employer is subject to an obligation under a federal or state regulation to not employ a person who has been convicted of certain offenses.The employer can still perform employment screening.

Should you have any questions about this legislation,you may contact  us at 770-649-8282 or email Aly.Sharp@s2verify.com