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The Great Recession of 2008 and its Impact on Credit Reporting

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Welcome to the second Blog article in our CRAsh Course on Credit Reporting. In this article, we’ll focus on the lasting impact a changing financial landscape can have on credit reporting legislation.

It’s 2017—nearly a decade since the Great Recession ended—and while things have recovered for many people financially, the lasting effects of the catastrophic financial event continue to be felt by some.

Due to more than 7 million foreclosures and the high rate of unemployment during, and shortly after the recession, a large percentage of the US population has negative information on their credit reports caused directly by the economic downturn.

To ensure those who experienced financial stress during the Great Recession could continue pursuing employment opportunities, important—and popular—regulations were implemented to limit the use of credit reports on pre-employment background screens.

Legislation now defines when and how credit reports can be used for employment decisions

11 states and the District of Colombia have placed regulations on the use of credit screens when hiring. Additionally, while there’s no law CURRENTLY in place, Minnesota’s Department of Human Rights recommends that a credit check is only done when money handling is an essential job function.

In states where no laws are in place, cities have stepped in to limit use of credit reports when making a hiring decision. Philadelphia and New York both have these rules in place.

These laws are fairly common sense. They typically bar employers from analyzing an applicant’s credit history unless the position deals significantly with money. Money handlers, accountants, managers and other financial positions are usually exempt from protection under the law.

Even when hiring in a state with no limits on credit reports, it is recommended that credit is only reviewed for individuals with significant access to finances. The Equal Employment Opportunity Commission (EEOC) states that “An employer must not have a financial requirement if it does not help the employer to accurately identify responsible and reliable employees . . .

While you may argue that knowing your new stock person or receptionist’s money handling abilities gives you a better idea of their potential to be a reliable employee, the candidate and EEOC may argue differently and claim the process is discriminatory. Even if you’re right, battling this in court costs time, money, and stress that’s easily avoided by simply limiting credit screening to personnel with financial responsibilities.

Let’s make sure best practices are in place

To mitigate risk in your employment decisions, add these rules to your screening program:

  1. Credit reports are only conducted on candidates with significant monetary responsibilities
  2. Your screening policy includes detailed information on why credit reports are used
  3. Separate screening policies are in place for money handling and non-money handling positions
  4. Background screens are conducted the same way for all candidates based on their position
  5. Your legal team has reviewed screening policies for compliance with state and federal guidelines

Another way to help ensure compliance to ongoing changes in legislation is to utilize the services of a background screening company—like A-Check Global—with a robust compliance department. As a trusted business partner, we review our clients’ screening policies, ensure services are not being conducted in violation of regulations, track legal changes, and suggest policy updates when new rules are put in place.

For more information about this topic feel free to contact us at connect@acheckglobal.com. We welcome the opportunity to speak with you.

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The What and Why of Adverse Action Notices

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When information contained in an A-Check Global background check is used wholly or in part by a requester to deny employment to an applicant, a specific process must be followed to comply with the requirements of the Fair Credit Reporting Act (FCRA). This process affords the applicant an opportunity to review their background report and dispute any specific information, if deemed inaccurate.

We’re here to help!

As your trusted partner, A-Check Global developed an Employment Screening Adverse Communication Kit to assist clients (end users of consumer reports) with regulatory responsibilities in accordance with FCRA Section 604(b)(3)(A). This kit helps save time, minimizes paperwork, and recommends a timeline to ensure applicants receive their pre-adverse notifications in a timely manner and are given a reasonable period to review results before final adverse notification is provided.

This kit contains two documents: (1) a pre-adverse communication/applicant response form, and (2) a final adverse action letter. Please consult with your Corporate HR as you follow the Instructions to create your company’s compliance documents.

Please also keep in mind, A-Check Global is not providing legal advice or counsel, thus our kit should not be deemed as such. Consult with your legal counsel to ensure the final product conforms to the needs of your organization.

Use our 2-step process to remain compliant

To facilitate the Adverse process, simply use our sample templates, customize them to meet your business requirements, and then mail out the Pre-Adverse and Adverse Notice yourself. Or, give us a call—we would be happy to assist in managing this process on your behalf.

Note: It is vital to your organization to ensure that the Adverse Action two-step process is executed each time a decision not to hire or place an applicant is made based on the content of a background report.

To process a Self-Adverse notification:

  1. Provide the applicant the pre-adverse letter with response form and a copy of the report used to make the adverse decision. Prepare each letter by adding the applicant’s name and the Consumer Reporting Agency’s name and contact information. This letter is designed to provide the applicant the opportunity to dispute any inaccurate or missing information within the report.
  2. If the applicant does not respond to the pre-adverse letter after a reasonable period of time—A-Check recommends six [6] business days—follow up with the applicant by providing them the final adverse action letter. Again, it is very important to add and confirm the applicant’s name and Consumer Reporting Agencies contact information—ensuring the name of the Consumer Reporting Agency on the report and the name of the Consumer Reporting Agency on the letter match.

The applicant can then dispute the accuracy of the Consumer Report by going online at http://www.myacheck.com or they can email us or contact us directly.

Remember, we’re here to answer your questions regarding your Pre-Adverse and Adverse Notice program. Please feel free to call, email, or live chat us at acheckglobal.com.

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A CRAsh Course on Consumer Reporting Agencies

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As your trusted partner, we love updating our blog with information that helps you make informed employment decisions. When speaking with customers, we’re often asked about the laws surrounding Consumer Reporting Agencies and these laws affect employers, employees, and applicants. Of course, this is such an immense topic that we’ve decided to devote several upcoming blog articles to the subject. For today, here’s a quick intro and a sneak peek at what you’ll see in upcoming entries.

The Birth of the Consumer Reporting Industry

The consumer reporting industry arguably gets its start in 1899 when the first credit bureau—Retail Credit Company—was founded. While originally used to assess a person’s ability to repay debt, consumer reporting now also encompasses tenant screening, employment screening, insurance risk analysis, and more.

Due to the potential for background screens to be used unfairly to deny credit, housing, or employment, a number of regulations have been put in place to protect the subjects of a background investigation. The law refers to these individuals as consumers.

Introducing . . . The Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) is the largest piece of consumer protection law. It acts as the foundation of consumer rights at the federal level. Both CRAs, and the companies that act as the end user of a consumer report must adhere to the rules of the FCRA. In addition to the FCRA, many states, counties, and municipalities have passed their own regulations. These regulations are designed to offer further protection to consumers from unfair background screening procedures.

Violations of consumer rights as provided by the FCRA and other consumer protection laws can lead to costly litigation. In 2016 more than $75 million was awarded to defendants who successfully argued violations of the FCRA. What’s worse, these violations are often reported in business news or national media, potentially damaging a company’s brand and ability to recruit qualified talent. This number is expected to rise in 2017 and 2018.

With the potential rise of litigation in mind, we’re dedicated to providing ongoing advice on how to fairly utilize consumer reports, and remain compliant with federal, state and local regulations. In upcoming posts we’ll present regulatory trends affecting the screening industry, and offer advice and best practices to comply with these regulations. We hope you like what you read, and find this information useful. Stay tuned for:

  • The importance of credit reports
  • The rise of “Ban the Box” legislation
  • Restricting the use of salary history when making employment decisions

If you want more information about any of our articles, or if there’s something you’d like us to write about please contact us at connect@acheckglobal.com.

Are You Prepared? Changes to Form I-9 Coming This November

Are You Prepared? Changes to Form I-9 Coming This November

The Form I-9, Employment Eligibility Verification is a standard industry document for employers throughout the U.S. Used to verify an employee’s identity and employment authorization, this form is required of all employers and their employees by federal law. The current Form I-9 has been utilized since 2013 to determine identity and eligibility, but a recent announcement from the US Citizenship and Immigration Services (USCIS) noted that revisions are coming soon. Continue reading “Are You Prepared? Changes to Form I-9 Coming This November”

Product Spotlight: Electronic I-9 and E-Verify Services

The Electronic Form I-9 feature of RAPID I-9 simplifies and improves the efficiency of the Form I-9 process by removing paper-based document management responsibilities and intelligently eliminating room for error. Electronic I-9 offers a compliant, paperless electronic Form I-9 submission, confirmation and retrieval process, complete with E-Signature, secure supporting document upload and document management.

A-Check’s Electronic I-9 complies with all Electronic Signatures in Global and National Commerce Act (ESIGN) requirements, including:

Continue reading “Product Spotlight: Electronic I-9 and E-Verify Services”