Part 1: Section § 604. Permissible Purposes of Consumer Reports
As with any law, the FCRA is a difficult read and contains much technical jargon. Over a ten-part series, Justifacts will be discussing the specific sections of the FCRA that are appropriate to background reports used for employment purposes.
If this is your first time viewing this series you may want to read the previous entry:
Intro to Understanding the FCRA and Background Screening Laws & Regulations
Section § 604. Permissible purposes of consumer reports
In general, any consumer reporting agency may furnish a consumer report under the following circumstances and no other:
1. In response to the order of a court having jurisdiction to issue, such as a subpoena, and in connection with proceedings before a Federal grand jury
2. In accordance with the written instructions of the consumer to whom it relates
3. To a person which it has reason to believe
A. intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer
B. intends to use the information for employment purposes
C. intends to use the information in connection with the underwriting of insurance involving the consumer
D. intends to use the information in connection with a determination of the consumer’s eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant’s financial responsibility or status
E. intends to use the information, as a potential investor or servicer, or current insurer, in connection with a valuation of, or an assessment of the credit or prepayment risks associated with, an existing credit obligation
F. otherwise has a legitimate business need for the information
i. in connection with a business transaction that is initiated by the consumer
ii. to review an account to determine whether the consumer continues to meet the terms of the account.
Conditions for Furnishing and Using Consumer Reports for Employment Purposes
1. Certification from User: A consumer reporting agency may furnish a consumer report for employment purposes only if:
a. the person who obtains such report from the agency certifies to the agency that the person has complied with paragraph (2) with respect to the consumer report, and the person will comply with paragraph (3) with respect to the consumer report if paragraph (3) becomes applicable; and information from the consumer report will not be used in violation of any applicable Federal or State equal employment opportunity law or regulation
b. the consumer reporting agency provides with the report or has previously provided, a summary of the consumer’s rights under this title, as prescribed by the Bureau under section 609.
2. Disclosure to Consumer: In general. Except as provided in subparagraph (B), a person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer, unless:
a. a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and
b. the consumer has authorized in writing the procurement of the report by that person.
3. Conditions on Use for Adverse Actions: In using a consumer report for employment purposes, before taking any adverse action based in whole or in part on the report, the person intending to take such adverse action shall provide to the consumer to whom the report relates
a. a copy of the report
b. a description in writing of the rights of the consumer under this title, as prescribed by the Bureau under section 609.
In Conclusion
Section 604 discusses both the purposes of requesting and conditions of using/furnishing consumer reports. Justifacts, as a CRA, in order to follow the regulations of Section 604, must receive certification from our clients that:
1. A disclosure has been made to the consumer who is the subject of the report;
2. If adverse action is taken, the consumer will be provided with a copy of the report and a summary of their rights under this title;
3. Information from the report will not be used in violation of any applicable Federal or State equal employment opportunity law or regulation.
Next: Part 2: Section § 605. Requirements relating to information contained in consumer reports
It is important to note that Justifacts is providing this information as a service to our clients. None of the information contained herein should be construed as legal advice, nor is Justifacts engaged to provide legal advice. We go to great lengths to make sure our information is accurate and useful. We recommend you consult your attorney or legal department if you want assurance that our information, and your interpretation of it, is appropriate to your particular situation.
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