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The Fair Credit Reporting Act provides protection to employees and applicants for employment against the misuse of their credit reports by the employers.

Section 613 of the Fair Credit Reporting Act permits credit information to be disclosed to employers and prospective employers for employment-related purposes. There are, however, rules to how and when that data can be used. First, the employer (or prospective employer) has to make “a clear and conspicuous disclosure” in writing to the employee (or prospective employee) before the report is procured. This has to be a single document that addresses nothing other than the credit report disclosure; it cannot be one paragraph in a document covering other topics. In addition, the employee has to authorize the disclosure in writing on that same document.

Second, if employers rely on a credit report to take adverse action (such as firing an employee, denying a job application, denying a promotion, or reassigning an employee), they must follow certain rules according to the FCRA. Section 1681b(b)(3) bars an employer from using the information in the report for adverse action against the employee unless the employer has first given the employee a copy of the credit report and a description in writing of the employee’s rights under the FCRA to correct the report. This notice must include: (1) the name, address, and telephone number of the Credit Reporting Agency that supplied the report; (2) a statement that the Agency that supplied the report did not make the decision to take the adverse action and cannot give specific reasons for it; (3) a notice of the individual’s right to dispute the accuracy or completeness of any information the agency furnished; and (4) a notice of the individual’s right to an additional free report from the agency upon request within 60 days.

If an employer violates this law, damages can be awarded to the employee. Damages are limited, though. The FCRA makes a distinction between “wilful” and “negligent” violations. Damages in cases involving wilful violations can be awarded in three different categories: First, the employee is entitled to actual damages (such as lost pay) of up to $1,000. Second, the employee may receive punitive damages. Third, the employee is entitled to recover his or her attorney’s fees.

For negligent violations, the employee can recover actual damages in whatever amount (there is no cap) as well as attorney’s fees, but no punitive damages. In the employment context, in which actual damages in the form of lost wages can be substantial but where courts may be reticent to award punitive damages, a negligent violation may be more valuable to the employee. It is prudent to plead in the alternative.

Cases involving violation of the FCRA must be filed within two years of the date that the plaintiff discovers the violation, but no more than five years after the violation has occurred.

If you think your rights have been violated under the Fair Credit Reporting Act, you should contact an attorney, who will review with you the specific details surrounding your firing and advise you whether they comprise a violation of law.

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