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The CFPB issued a statement which said employers must comply with FCRA regulations when using AI for employment screening.

The CFPB Statement

Towards the end of 2024, the Consumer Financial Protection Bureau (CFPB) released a document which said employers who use Artificial Intelligence (AI) during the screening process must adhere to laws created by the Fair Credit Reporting Act (FCRA). Their statement covered tools that will gather public, employment and other records. According to the CFPB, when employers evaluate reports that were created at least partially with AI tools, they must assess whether the:

• Way the data is used qualifies as an employment purpose under the FCRA.
• Report was compiled by a Consumer Reporting Agency (CRA).

CFPB Scrutiny

Following the release of their statement, the CFPB intends to review the performance of AI tools so they can understand if they meet FCRA requirements. Among other things, they will consider how AI is utilized to create reports and what type of organization is using the technology for this purpose.

Of note, the CFPB previously did not affirm the FCRA was relevant to software developers. Therefore, AI has only recently been subjected to their evaluation. However, due to the myriad of ways in which AI can now be used, they are starting to focus on plans to help ensure various types of software do not supersede federal laws.

Employers are encouraged to review any AI tools they currently work with and:

• Whether the output they provide could be deemed a consumer report.
• If the data their AI provides is used for employment purposes.
• If any of the data in those reports was provided by a third party.

About The FCRA

The FCRA is a federal law that was written to protect consumers. It includes various regulations employers and CRAs must follow during the hiring and background screening process. Consumer reports are defined in the law as “any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for” certain purposes including “employment purposes.”

Working With A CRA

AI can be a valuable tool for organizations, but it is one that will continue to have new regulations as laws are passed to protect consumers. These laws will be designed to help ensure AI tools comply with existing and upcoming legislation.

One of the best ways for employers to bolster their compliance efforts is to work with a CRA that is accredited by the Professional Background Screening Association (PBSA). To earn accreditation, CRAs must undergo a thorough audit by a third party and demonstrate they follow FCRA laws and take reasonable steps to provide current, accurate and reportable data.

If your organization is in need of employment background checks, please contact us. Our highly experienced team can help you customize screening packages which suit your specific needs and comply with relevant laws and industry standards. We are available to assist you Monday through Friday from 5am to 6pm PT.