Ninth Circuit Court Of Appeals FCRA Requirements Decision

The United States Court of Appeals for the Ninth Circuit issued an important decision relating to the “standalone” disclosure requirement under the Fair Credit Reporting Act (FCRA). This case offers further guidance about what can and cannot be included in an FCRA disclosure form. As FCRA disclosures are a source of both compliance confusion and litigation, this type of detailed guidance is important to closely review and pay attention to. SambaSafety has updated its form release to ensure compliance with this recent decision. For a sample release, please click here.

The original, underlying case was brought by an employee who was hired contingent on a background investigation.  The background investigation was conducted by a vendor of the employer, after the applicant signed a disclosure and authorization form.  When the employee was dismissed from his position, following his background check, he brought this case, arguing that the disclosures given to him during the background check process violated the FCRA.

The FCRA requires that before an employer pulls a consumer report on a job applicant that the employer must disclose to the consumer that the employer may obtain such a report.  The disclosure must be “in a document that consists solely of the disclosure,”  15 U.S.C. 1681b(b)(2)(A)(i), which the Ninth Circuit has previously held means that no extraneous information may be included with the disclosure and that the form should contain nothing more than the disclosure itself.

In Walker, the district court previously had dismissed the employees claim that the disclosure form he signed was not standalone.  However, the Ninth Circuit reversed the lower court on this claim and offered a review of what can be included with a disclosure.

The court held that a disclosure should consist of a plain statement that a consumer report may be obtained for employment purposes, and that an employer may also include a “concise explanation” of what that statement means.  The court gave the example of a properly limited disclosure including what a consumer report entails, how it would be obtained and for what type of “employment purpose” the report might be used for.  The court cautioned, however, that the explanation must not be so long or confusing such that it detracts from the disclosure or in any way makes the disclosure not clear and conspicuous.  The court emphasized that purpose of any type of explanation is to help the consumer understand the disclosure.

Specifically, the court performed a paragraph by paragraph review of the employer’s existing disclosure form and found that:

• The portion of the employer’s disclosure that referenced both investigative reports as well as consumer reports was permissible, as investigative reports are a specific category of consumer reports and so discussing both in the same disclosure does not violate the standalone requirement.
• Paragraphs which describe who the consumer reporting agency is, how to contact them and what type of information they will review (such as education, work history, address history, criminal records and driving records) also do not violate the FCRA standalone disclosure requirement.
• An explanation of how a consumer may obtain and inspect files from a CRA, while likely included in good faith to provide information about a consumer’s rights, does violate the standalone requirement as it potentially distracts the consumer from the privacy rights under the FCRA.  The court held that this type of information should be provided in a separate document because it is not part of the disclosure that a consumer report will be obtained for employment purposes, but rather related to separate consumer rights.

Separately, the Ninth Circuit also affirmed the portion of the lower court’s decision that found that employers, in a pre-adverse action letter sent before taking action against an applicant or employee, are not required to provide employees or applicants with an opportunity to directly discuss their consumer report with the employer. Rather, it is sufficient to have a notice in a pre-adverse action letter that describes the consumer’s ability to dispute the completeness or accuracy of the information with the consumer reporting agency.

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