New Rules for Background Checks

Kegler Brown E-mployment Alert

Employers are currently required to follow certain prescribed procedures and notices when they perform background checks on applicants or employees utilizing the services of an outside consumer reporting service.

A provision of a new federal law (the Dodd-Frank Wall Street Reform and Consumer Protection Act) has added a new requirement for background checks. The new requirements apply to credit score information, and they become effective on July 21, 2011.

The essence of the new requirements for credit score information is that employers who take adverse action, in whole or in part, on the basis of credit scores must:

  • Provide notice to the individual that the credit score was a factor in the decision;
  • Inform the individual of the credit score; and
  • Inform the individual of the identity of the service that provided the credit information.

These new requirements on credit scores, of course, are in addition to the existing restrictions and notice requirements applicable to background checks under the Fair Credit Reporting Act.