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New Requirements for Obtaining and Using Credit Reports

On September 30,1997, the Consumer Credit Reporting Reform Act went into effect. The CCRRA imposes new requirements on employers who use credit reports to evaluate applicants for employment, or to evaluate current employees for promotion or retention. The requirements of this law vary depending on whether the report sought is a "consumer report" or an "investigative consumer report."

Consumer Reports

A consumer report is based on an individual's credit history, and may reflect an individual's creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. Before requesting a consumer report from a consumer reporting agency, an employer must:

(1) clearly disclose in writing to the applicant or employee that it may obtain a consumer report (the document containing the disclosure cannot include any other information), and

(2) secure the written consent of the applicant or employee.

Once a consumer report has been obtained, the employer cannot take "adverse action!" based on the report until it provides the applicant or employee with:

(1) a copy of the report, and

(2) a statement of the individual's rights under the CCRRA to challenge the information contained in the report.

The CCRRA defines an adverse action as a denial of employment or any other employment decision that adversely affects the subject of the report.

Investigative Consumer Reports

An investigative consumer report generally contains the same type of information as a consumer report, but is obtained through interviews with friends, neighbors, associates, or others. Before obtaining an investigative consumer report from a consumer reporting agency, or taking any adverse action based on such a report, an employer must:

(1) comply with the above requirements for obtaining and using consumer reports, and

(2) no later than three days after requesting an investigative report, notify the applicant or employee that the employer has requested such a report and that the individual has the right to request additional information regarding the nature and scope of the report.


Failure to follow the new requirements for getting or using credit reports can lead to substantial penalties. Applicants or employees who prove negligent noncompliance with the Act may recover actual damages, costs, and attorney's fees. Applicants or employees who prove willful noncompliance with the Act may also recover punitive damages.

If you have any questions about obtaining or using credit reports under the new law, please do not hesitate to contact our office. Thank you.

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