Advisory Opinion to Basting (06-11-98)

June 11, 1998

Ellen K. Basting, Esq.
Davis & Kuelthau, s.c.
111 E. Kilbourn
Suite 1400
Milwaukee, WI 53202-6613

Re: Section 603(o) of the Fair Credit Reporting Act

Dear Ms. Basting:

This is in response to your letter posing two questions concerning the application of the Fair Credit Reporting Act (FCRA) to the activities of one of your clients, an organization that provides employee-screening services, including personal reference checks and driving record and criminal record checks, to member companies and charges fees for these services.

1. Applicability of Section 603(o)

You request our views as to whether Section 603(o) of the FCRA, which provides an exemption from the definition of "consumer report" for certain communications, applies to your client when it conducts reference checks in connection with employment applications under consideration by its clients. We believe that this exemption does not apply to your client, and that your client's reports provided as part of its reference checking services are consumer reports under the FCRA.

Section 603(o) provides an exemption from coverage by the FCRA for certain communi-cations if specified procedures are followed (including notice, consent by affected consumers, and the disclosure of information upon request). Section 603(o)(2) limits the exemption to reports "made to a prospective employer for the purpose of (A) procuring an employee for the employer; or (B) procuring an opportunity for a natural person to work for the employer." In our view, the language of this subsection limits the application of the provision to the activities of employment agencies, and not employment screening services. Aside from the language of Section 603(o)(2), the fact that Section 2402(f) of the Consumer Credit Reporting Reform Act of 1996 -- the portion of the bill that added Section 603(o) of the FCRA -- is titled "Exclusion of Certain Communications by Employment Agencies From Definition of Consumer Report" makes it clear that Congress intended for the exemption to be limited to such agencies. In addition, the discussions of the scope of this section that we have found in the legislative history contain explicit statements that the provision applies to employment agencies. S. Rep. 104-185, 104th Cong., 1st Sess., at 34 (1995); H.R. Rep. No 103-486, 103rd Cong., 2nd Sess., at 29 (1994). Since your client is a screening organization and not an employment agency, it is our opinion that Section 603(o) does not apply to your client when it checks employment references for its clients.

2. Checking Criminal and Driving Records

You also ask whether your client is covered by the FCRA when it provides driving record and criminal record checks on employment applicants to its customers for a fee.

Driving record checks and criminal record checks are covered by the FCRA when they are provided to an employer by a "consumer reporting agency" because they involve the "character, general reputation, personal characteristics, or mode of living" of the consumer being considered for employment, and thus meet the definitional requirement of a "consumer report" in Section 603(d). From your description of your client's business, it is clear that your client is a "consumer reporting agency" (i.e., it collects and assembles personal reference information and other information and provides this information to third parties for fees on a regular basis). As a "consumer reporting agency" providing "consumers reports," your client is covered by the FCRA when it provides reports containing criminal and driving records. The fact that the fees it charges cover only the cost of collecting and processing the information is irrelevant for the purposes of the FCRA.

I hope that this information answers your questions. Of the opinions in this letter are the opinions of the staff and do not necessarily reflect the position of the Commission or of any particular Commissioner.

Sincerely,


William Haynes
Attorney
Division of Credit Practices