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Ninth Circuit: Fair Credit Reporting Act Disclosure Must “Stand Alone” from Disclosures Required by State Law

by D. Gregory Valenza | | January 29, 2019

Employers that use background check companies to administer credit or other background checks:  take note.  The Ninth Circuit Court of Appeals further limited what qualifies as a “clear and conspicuous” disclosure that “solely” consists of the disclosure under the federal Fair Credit Reporting Act (“FCRA”).   Those forms that include both federal and state disclosures on the same form are invalid under not only the FCRA, but also under California law.  As a result employers must create new disclosure forms (or ensure their vendors do so). 

By way of background, Desiree Gilberg applied for employment with Checksmart Financial LLC.  As part of the application process, she completed a background check application and disclosure.  Like many background check disclosures, this form contained not only the disclosure required under the FCRA, but also various state law disclosures.  These state laws mainly did not apply to Gilberg, who was a California employee.  The text of the form is laid out in the opinion, and a copy of the actual form is attached as an appendix to the opinion.

The Ninth Circuit previously held

in Syed v. M-I, LLC, 853 F.3d 492 (9th Cir.2017), that FCRA contains “clear statutory language that the disclosure document must consist ‘solely’ of the disclosure.” Id. at 496.

But the Court in Syed did not address whether state disclosures could be combined with the federally required one.  

The Court held that the federal disclosure has to be separate from the state law disclosures:

Consistent with Syed, we now hold that a prospective employer violates FCRA’s standalone document requirement by including extraneous information relating to various state disclosure requirements in that disclosure.

So, the combined disclosure form Gilberg signed violated this rule.  

The Court also held that a combined disclosure violates California law, which specifically provides for a separate document “solely” consisting of the disclosure.  So, employers violate California law by including California’s disclosure with other states’.

The FCRA requires the disclosure to be both “clear” and “conspicuous.”  Because the document included states that had no relevance to Gilberg, and because the form included some mumbo jumbo, the Court decided it was not “clear,” but it was sufficiently “conspicuous.”

So, this case will require revisions to background check forms, like pronto.

The case is Gilberg v. Cal. Check Cashing Stores and the opinion is here




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