Compliance Quandaries:
The Act That Governs Us All

Each quarter, we will dedicate an article to an important compliance topic. The issues that will be appearing here are ones that are in the news or ones that, even if no legislation has passed, are poised to have a big impact on your business. Here we aim to help you understand what might be coming your way. If there are any particular issues that you want to hear about, please let us know by emailing knordfors@geninfo.com. Please keep in mind that this is intended for information purposes only and should not be construed as legal advice.

The situation

From the Driver Privacy Protection Act (DPPA) to the Federal Deposit Insurance Act (FDIA) to the Fair Credit Reporting Act (FCRA), GIS and every other background screening company has to comply with a wide variety of laws. The most important of these, the one that governs every single consumer reporting agency including every single background screening company, is the FCRA.

The FCRA governs everything from what types of information can be disclosed to what the information can be used for, to how far into the past you can look for information. This Act is overseen by the Federal Trade Commission or FTC.

In 1990, the FTC issued a commentary on the FCRA that provides guidance on how to interpret the FCRA. In the intervening 20+ years, the FCRA has been updated twice and though the FTC has issued informal opinion letters to update their guidance, it has not been on a timeline that coincided with these updates. This inequity between the updated FCRA and the updated guidance has rendered much of the FTC’s previous opinions obsolete. In July of 2011, the FTC formally withdrew their initial commentary from 1990 and issued a new guidance on the FCRA.

The forecast

This guidance, which was discussed in the compliance announcement released on July 21, 2011, gathers the commentaries that the FTC has previously released into one document. However, it is important to note that the FTC may have also modified their commentaries when gathering them into this one document.

This being said, please review the FTC Staff Report with Summary of Interpretations. One very important point is that the FTC says the term “employment purposes” includes “a nonprofit organization staffed in whole or in part by volunteers.” This means that, according to the FTC, volunteer screening involves a consumer report for employment purposes – one of the categories that the FCRA regulates most heavily.

While this is not fully supported by the sources and lawsuits noted by the FTC, courts do often defer to the FTC’s guidance on FCRA matters. This means that if you are screening any volunteers, you should consider (among other strictures) adopting practices relating to employment-purpose screening including disclosures, authorizations and pre-adverse/adverse action notices.