Review Your Adverse Action Process

As you are aware, federal law imposes obligations on you before and after you use information from VICTIG to take “adverse action” for employment purposes. To review:

Before taking an adverse action, the user must provide a copy of the report to the consumer as well as the summary of the consumer’s rights (The user should receive this summary from the CRA.)

A Section 615(a) adverse action notice should be sent after the adverse action is taken. An adverse action notice also is required in employment situations if credit information (other than transactions and experience data) obtained from an affiliate is used to deny employment. Section 615(b)(2).

“Adverse actions” include all business, credit, and employment actions affecting consumers that can be considered to have a negative impact as defined by Section 603(k) of the FCRA – such as denying or canceling credit or insurance, or denying employment or promotion. No adverse action occurs in a credit transaction where the creditor makes a counteroffer that is accepted by the consumer.

If you take any type of adverse action as defined by the FCRA that is based at least in part on information contained in a consumer report, Section 615(a) requires you to notify the consumer. The notification may be done in writing, orally, or by electronic means. It must include the following:

• The name, address, and telephone number of the CRA (including a toll-free telephone number, if it is a nationwide CRA) that provided the report.

• A statement that the CRA did not make the adverse decision and is not able to explain why the decision was made.

• A statement setting forth the consumer’s right to obtain a free disclosure of the consumer’s file from the CRA if the consumer makes a request within 60 days.

• A statement setting forth the consumer’s right to dispute directly with the CRA the accuracy or completeness of any information provided by the CRA.

What is starting to happen is that the laws are changing quickly. I some instances, there are state laws requiring actions prior to even the pre-adverse action notice. For example, now in California, some interpretations are that employers should do an initial pre-assessment prior to sending the pre-adverse action notice.

There has been an uptick in litigation in the adverse action area. You might want to review your procedures, avail yourself of our HR State Rules Register for the areas of your workers’ employment, and speak with your counsel if in doubt.

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