The FCRA for investigators

A consumer report is any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. It must be used, expected to be used, or collected in whole or in part to serve as a factor in establishing the consumer’s eligibility for credit or insurance for personal, family, or household purposes, for employment purposes, or for another purpose authorized under section 1681b (1681a(d)(1)). It reaches character and reputation, not only credit.

A consumer reporting agency is any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for that purpose (1681a(f)).

An investigator who regularly supplies this kind of information to clients for those purposes may meet that definition, depending on the facts.

Employment purposes means evaluating a consumer for employment, promotion, reassignment, or retention as an employee (1681a(h)). Before procuring a consumer report for employment purposes, the employer must make a clear and conspicuous written disclosure to the consumer that a report may be obtained, and the consumer must authorize it in writing (1681b(b)(2)(A)).

Before taking adverse action based in whole or in part on the report, the employer must give the consumer a copy of the report and a written description of the consumer’s rights under the FCRA (1681b(b)(3)(A)).

An investigative consumer report is a consumer report, or part of one, in which information on a consumer’s character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer, or with others with whom the consumer is acquainted or who may have knowledge of that information. Specific factual information on a consumer’s credit record obtained directly from a creditor of the consumer is excluded (1681a(e)).

Section 1681d adds duties for anyone who procures or causes one to be prepared:

• Disclosure. It must be clearly and accurately disclosed to the consumer that an investigative consumer report may be made. The written disclosure must be mailed or delivered no later than three days after the report was first requested, state the right to request more information under 1681d(b), and include the summary of rights under 1681g(c) (1681d(a)(1)).
• Certification. The person must certify to the consumer reporting agency that it made the disclosures and will comply with 1681d(b) (1681d(a)(2)).
• Nature and scope. On a written request from the consumer within a reasonable time, the person must make a complete and accurate written disclosure of the nature and scope of the investigation. It is due no later than five days after the request was received or the report was first requested, whichever is later (1681d(b)).

Section 1681a(y) was added by the Fair and Accurate Credit Transactions Act of 2003 (Pub. L. 108-159). Through 1681a(d)(2)(D), it takes certain workplace investigation communications out of the definition of consumer report. A communication qualifies only if all four conditions in 1681a(y)(1) are met:

1. but for this exclusion, it would be a consumer report;
2. it is made to an employer in connection with an investigation of suspected misconduct relating to employment, or of compliance with federal, state, or local laws and regulations, the rules of a self-regulatory organization, or any preexisting written policies of the employer;
3. it is not made for the purpose of investigating a consumer’s credit worthiness, credit standing, or credit capacity; and
4. it is not provided to anyone except the employer or its agent; a federal, state, or local government officer, agency, or department; a self-regulatory organization with regulatory authority over the employer or employee; as otherwise required by law; or under section 1681f.

After taking adverse action based in whole or in part on such a communication, the employer must disclose to the consumer a summary containing the nature and substance of the communication. The sources of information acquired solely for preparing what would otherwise be an investigative consumer report need not be disclosed (1681a(y)(2)).

Section 1681a(d)(2)(D) still says “subsection (x)”. That subsection was redesignated (y) in 2010 by Pub. L. 111-203.

A person who willfully fails to comply with the FCRA is liable for actual damages or damages of not less than $100 and not more than $1,000, punitive damages as the court allows, and costs and reasonable attorney’s fees (1681n(a)). For a natural person who obtains a consumer report under false pretenses or knowingly without a permissible purpose, the measure is actual damages or $1,000, whichever is greater (1681n(a)(1)(B)). Negligent noncompliance makes a person liable for actual damages plus costs and fees (1681o(a)).

A person who knowingly and willfully obtains information on a consumer from a consumer reporting agency under false pretenses shall be fined under Title 18, imprisoned for not more than 2 years, or both (1681q).

• The FCRA question often turns on who receives the information and what decision it feeds.
• Interview-based background work for a hiring decision can be an investigative consumer report, which brings the 1681d disclosure and certification duties.
• The 1681a(y) exclusion has conditions. Sharing the results beyond the listed recipients, or investigating creditworthiness, takes a communication outside it.

• 15 U.S.C. 1681a, Definitions; rules of construction
• 15 U.S.C. 1681b, Permissible purposes of consumer reports
• 15 U.S.C. 1681d, Disclosure of investigative consumer reports
• 15 U.S.C. 1681n, Civil liability for willful noncompliance
• 15 U.S.C. 1681o, Civil liability for negligent noncompliance
• 15 U.S.C. 1681q, Obtaining information under false pretenses
• 15 U.S.C. chapter 41, subchapter III, official text on govinfo
• CFPB, Regulation V (12 CFR Part 1022)
• FTC, Using consumer reports: what employers need to know