BlogLine
Employer use of reports utilizing third-party consumer data tracking is subject to the Fair Credit Reporting Act
11/7/24
Data tracking for purposes of marketing has often been debated, however, the increasing use in employment decisions has been less discussed. The Consumer Financial Protection Bureau (“CFPB”) has now issued guidance related to the use of consumer data including algorithmic reports for employment purposes. On October 24, 2024, the CFPB issued guidance for employers seeking to make employment decisions utilizing consumer reports including background dossiers and algorithmic scores, which often utilize AI-based surveillance data.
While most people think solely of companies like Equifax, Experian, or TransUnion when they hear “consumer reporting agencies”, CFPB made clear that the definition extends to any company assembling or evaluating consumer information obtained from third parties, including those that use consumer information to train algorithms to produce summaries or scores. Consumer reporting and background screening companies can offer reports on worker activities, habits, and biometric information. Some of the data being used in these reports include consumer shopping habits, driving behavior, web browsing, collective bargaining activity, and even keystrokes/screenshot trackers to assess productivity.
The Consumer Financial Protection Circular 2024-06: “Background Dossiers and Algorithmic Scores for Hiring, Promotion, and Other Employment Decisions” warned that any such consumer reporting was subject to the Fair Credit Reporting Act (“FCRA”), which contains general and employment specific obligations before an employer can obtain consumer data. These obligations are triggered when the information is sought for the purpose of evaluating a consumer for employment, promotion, reassignment, or retention and include obtaining permission from the worker and providing notice to the worker that any adverse action is based upon information learned in a consumer report.
Employees are further protected under the FCRA by having the right to know what is in their file at a consumer reporting agency and the right to dispute any incomplete or inaccurate information. This, combined with the employer provided notice, allows employees to challenge decisions they believe to be based on incorrect consumer information. For this reason, employers should be cautious about the companies they rely upon for this type of consumer data reporting and be prepared to respond to employee challenges.
For more information on the topic, contact Courtney M. Knight at courtney.knight@fmglaw.com, or your local FMG relationship partner.
Share
Save Print