The Consumer Financial Protection Bureau is taking aim at employers using invasive technologies and third-party consumer reports to track and make decisions about workers. With new guidance issued yesterday, the CFPB warns that companies must comply with the Fair Credit Reporting Act when using such tools.
The big picture: As employers increasingly deploy digital tracking tools and algorithmic decision-making systems, the CFPB is making it clear that workers have the right to consent, transparency, and dispute inaccurate data. The new guidance emphasizes that any consumer reports — including AI-based scores or surveillance data used for employment decisions — are subject to FCRA regulations.
Key details:
- Consent is required: Employers must obtain worker consent before using consumer reports, whether for hiring, promotions, or other employment decisions. This ensures that workers are aware of how their personal information is being used.
- Transparency on adverse actions: Workers must be informed when a decision, such as termination or demotion, is based on information from these reports. Employers must provide details so workers understand the reasons and can dispute inaccuracies.
- Right to dispute: If workers find inaccurate or incomplete information in a report, they have the right to dispute it. Employers and the third-party companies providing these reports are required to correct or delete unverifiable data.
- Limits on use: The guidance restricts the use of these consumer reports strictly to employment purposes. Employers are not permitted to sell this information or use it for marketing financial products to workers.
What they’re saying: “Workers shouldn’t be subject to unchecked surveillance or have their careers determined by opaque third-party reports without basic protections,” said CFPB Director Rohit Chopra. The CFPB aims to ensure that workers retain control over the data influencing their employment outcomes.
Between the lines: This move builds on the CFPB’s broader efforts to protect workers from exploitation and abuse through employer-driven debt, misleading vocational training programs, and predatory financial products.
