FCRA Disclosure Claims: The Next Big Thing

« Back to list

May 26, 2015

Over the last 10 years, I’ve reviewed a lot of FCRA disclosure forms. Generally speaking, the forms in use today are much better (read more compliant) than the forms that were circulating even a few years ago. Employers and the consumer reporting agencies who supply their clients with disclosure forms seem to have finally gotten the message that it is not okay to include things like waiver and release language in a Section 604b disclosure.

However, if the Supreme Court does not dramatically change the law related to statutory damages in the Spokeo case, I predict that we will see another round of class action litigation over FCRA disclosures. This time, the claims will arise out of the practice of including state law disclosures on the same form as the Section 604b disclosure.

The language of Section 604b of the FCRA requires that the disclosure given to consumers who will be the subject of an employment-related background check must be “clear and conspicuous” and be in “a document that consists solely of the disclosure.” The obvious intent of the statute is to prevent employers from burying the FCRA disclosure in boilerplate and irrelevant language. Judged against this standard, the problems with including a variety of state law disclosures in the same document as the Section 604b disclosure should be apparent.

First, it is a technical violation of the statute. Section 604b could not be clearer. The 604b disclosure must be made in a document that consists “solely of the disclosure” and the statute’s reference to “the disclosure” unmistakably and exclusively refers to the federally-mandated disclosure, i.e. Section 604b.

Second, in practice, it is usually a substantive violation of the statute. Most of the “combo disclosures” I’ve seen include not only the federally-mandated disclosure, but also all of the supplemental disclosures required by state law. So, the consumer is confronted with the Section 604 disclosure and multiple state law disclosures, some or all of which are not applicable to him/her. To put it in concrete terms, why should a job applicant in Georgia have to sift through disclosures required by California and other states in order to find the 604b disclosure? From the perspective of the consumer in Georgia, the combo disclosure is no better than a disclosure buried in pages of boilerplate.

Third, don’t assume that just because there is no circuit court authority or FTC guidance on this issue, employers will have a defense to willfulness claims based on Safeco. Unlike the provisions of the FCRA at issue in Safeco, the language of Section 604b is not “less than pellucid.” And, based on the text of Section 604b alone, one could certainly argue that interpreting the FCRA to allow the inclusion of the state law disclosures on the same form/page as the Section 604b disclosure is “objectively unreasonable.”

Finally, this is a problem that is just too easy to fix. Put the Section 604b disclosure on a single page (printed or electronic) and put the state law disclosures on another page or pages. Given the potential exposure, why would any employer or CRA do otherwise?

- Craig E. Bertschi, Partner — McRae Bertschi LLC