CFPB Warns Employers That Use of Third-Party Consumer Reports Must Be Fair

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  • The CFPB issued guidance regarding “Background Dossiers and Algorithmic Scores for Hiring, Promotion, and Other Employment Decisions.”
  • In the guidance, the CFPB warns that, like credit reports used by lenders to make lending decisions, third-party AI and background dossiers that convey scores about workers are often governed by the Fair Credit Reporting Act (FCRA) when used by employers to make hiring, promotion, reassignment, or retention decisions.
  • The CFPB emphasizes that employers utilizing such reports must obtain worker consent, provide transparency about the data used before any adverse decisions, and allow workers to dispute inaccurate information, and encourages employers to review their current practices regarding the use of third-party consumer reports to ensure compliance with FCRA requirements.
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