Earlier this month, the Consumer Financial Protection Bureau (CFPB) issued an Advisory to protect consumer privacy. It is not surprising, given the expanding “metaverse” of personal information that so many companies are compiling, even while you are reading this blog.
Specifically, the CFPB is focusing on companies that use and share credit reports and background check (or consumer) reports. This CFBP Advisory Opinion elucidates in clear language that it is not only the credit reporting companies that have an obligation to protect consumer privacy, but it is also the users of these reports. Users of consumer reports means any company who orders a credit report or a background screening report on a potential applicant or customer.
The CFPB also plainly states that a permissible purpose must exist, for the credit or background screening report to be obtained. Typical permissible business purposes include:
- Employee Screening
- Volunteer Screening
- Resident or Tenant Screening
- Franchisee Screening
- Country Club Membership Screening
- Client Screening
- Vendor Screening
- Board of Director Screening
The Fair Credit Reporting Act (FCRA) has always required that consumer reports, whether they be credit reports or full background screening reports, be obtained only when both consumer consent and a permissible business purpose exist. In addition, the FCRA requires strict confidentiality and data privacy. The consumer report can only be shared with the end-user of the information, i.e., the company that originally requested the report. It is not legal to share the consumer report with any third party, unless specifically authorized by the consumer.
The CFPB states it will be utilizing the FCRA to enforce its Advisory. It should be noted that reliable background screening companies are consumer reporting agencies (CRA’s) and they operate in a world where the requirements regarding permissible purpose, consumer consent, and data privacy have always existed.
Not all users of consumer reports may understand this, even though they should have signed a service agreement with the CRA that clearly states their User responsibilities. Further the myriad of online websites that claim to provide background checks, with advertisements of instant, free and/or low-cost, are not consumer reporting agencies (they will disclose that fact in their small-type legal disclosures, usually at the very bottom of the page). These reports are not FCRA-compliant, cannot be used for a FCRA permissible business purpose, and any guarantees for consumer data privacy are not likely to be found.
When needing a credit or background check report, be sure to utilize a reliable background screening company that is also a consumer reporting agency. CRAs follow the Fair Credit Reporting Act, and they know how to protect consumer data privacy.
Posted by: Rudy Troisi, L.P.I., President and CEO, Reliable Background Screening
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