Consumer Credit Reporting Reform Act and Welfare Reform Legislation Impose New Obligations on Employers

Two recently enacted laws impose additional requirements on employers which affect hiring and other employment decisions. The Consumer Credit Reporting Reform Act of 1996 (Reform Act) imposes additional disclosure requirements on employers who use "consumer reports" in making employment decisions. The Personal Responsibility and Work Opportunity Act of 1996, commonly known as the "welfare reform legislation," will require employers to report certain identifying information on all new hires to a designated state agency. Both new acts impose financial penalties on employers who do not comply with these new requirements.

The Reform Act Changes The Use of Backround Checks

The Reform Act substantially amends the Fair Credit Reporting Act (FCRA) that, for 25 years, has regulated the use of credit information by banks, the credit industry, employers and others. After nearly a decade of debate in Congress, this legislation was finally passed in September 1996 as part of the Omnibus Consolidated Appropriations Act for Fiscal Year 1996. The provisions of the Reform Act are effective September 30. This White Paper focuses only on the implications of the Reform Act for employers.

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