News

October 24, 2024

CFPB Warns Employers Using AI & More to Comply with FCRA

On October 24th, The Consumer Financial Protection Board warned companies using third-party consumer reports — including background dossiers and surveillance-based, “black box” AI or algorithmic scores about their workers — to follow Fair Credit Reporting Act (FCRA) rules. This means employers must obtain worker consent, provide transparency about data used in adverse decisions, and allow workers to dispute inaccurate information.

Such activities include use of third-party consumer reports by employers to make employment decisions about their workers. These reports increasingly extend beyond traditional background checks and may encompass a wide range of information and assessments about workers. For example, some employers require workers to install apps on their personal phones that monitor their conduct, which may be used to assess their performance.

While background checks have long been a part of employment and hiring practices, the emergence of new technologies has expanded the scope and depth of worker tracking. If you use a third-party vendor for any of these related services, ensure you are familiar with the FTC’s latest guidance.

This summer, the CFPB announced a proposed, interpretive rule to ensure workers know the costs and fees of paycheck advance products, aka “earned wage products.”