Hunton Employment & Labor Perspectives

On October 24, 2024, the Consumer Financial Protection Bureau (CFPB) issued a policy statement (known as a Circular) to explain the link between the Fair Credit Reporting Act (“FCRA”) and employers’ growing use of artificial intelligence to evaluate, rank, and score applicants and employees. 

“Ban-the-Box” legislation has seen steady growth throughout the country for more than two decades.  Currently, there is no federal legislation on the topic for private employers but a good number of states have limited their ability to inquire about or make decisions based on a prospective employee’s criminal background history.

When there is a willful violation to the Fair Credit Reporting Act (”FCRA”) consumers can recover either actual damages sustained by the consumer or statutory damages of no less than $100 and not more than $1000. (Punitive damages and attorney fees also are available).  There has been a trend in the district courts examining whether plaintiffs must prove that they suffered actual damage in order to recover statutory damages. Since 2007 several Circuits have reviewed this argument and each has explained that the provision for statutory damages does not require a showing of “actual damages.” The Eleventh Circuit is the most recent to weigh in on this question in Santos v. Healthcare Revenue Recovery Grp., and agrees with its sister Circuits.

Employers who conduct background checks on applicants or employees must comply with the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq.  Among other things, the FCRA requires employers who procure criminal background reports (“consumer reports”) to provide applicants and employees with a Summary of Rights form as prepared by the Consumer Financial Protection Bureau (CFPB) when providing them with the FCRA-required pre-adverse action notices. See 15 U.S.C. § 1681b(b)(3)(A)(ii).