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[Webinar] Tackling Today’s Employment and Income Verifications

2014-03-19 10:00:00

As an employer, you may already be experiencing an increase in the number of employment and income verification requests on behalf of your employees because of the low interest rates and a recovering economy that continues to spur increases in mortgage loan activity, consumer credit applications, demand for auto loans and more.

Did you know that completing even one employment or income verification request incorrectly can put your company at risk for providing confidential information to an unknown third party with no permissible purpose? This webinar will cover not only how you can help protect your business and your employees from increased liability exposure due to identity theft, but also how you can securely outsource your company’s employment and income verification process. You will also learn how ADP can help you be in full compliance with the Fair Credit Reporting Act (FCRA) and increase your employee satisfaction by meeting their immediate needs while reducing your current costs for the verification requests.

Please join ADP on Wednesday, March 19 at 10:00 AM PST/1:00 PM EST to learn more about the landscape of employment and income verifications – what impact an employer may feel from the current market and regulatory changes, how verifications can have a direct impact on the productivity of your workforce, and how to help minimize your firm’s exposure to liability and help ensure regulatory compliance, all while providing a valuable service to your employees.


Deepak_Mehta_Web_smDeepak Mehta
Vice President of Employment Verification Services
ADP
Deepak Mehta is the Vice President and Product GM for the Employment Verification business at ADP and has been with the company for almost 20 years. Deepak is directly responsible for the management and strategic growth of the Employment Verification business at ADP, which continues to benefit from double digit growth year over year due to higher product awareness, demand and satisfaction among ADP clients and their employees. Deepak began his career at ADP in 1994 and over the years has held several roles within Product Development, Marketing, Business Development and Strategy. Prior to joining ADP, Deepak’s career included working for various national and regional banks, managing their mortgage and consumer lending operations.

 

Steve Schulz_May2013_webSteve Schulz
Senior Director Product Marketing
Equifax Workforce Solutions
Steve Schulz is Senior Director of Product Marketing at Equifax Workforce Solutions. He is responsible for developing and executing marketing strategies that support the growth of The Work Number® employment verification service. He is a go-to-market strategy leader in Employer Services focused on value creation and client-centric product bundling for human resources and pre-employment screening service providers. With 15 years of experience in marketing and communications, Schulz has held key, market-facing positions at companies ranging from Fortune 500s to start-ups. He has extensive experience in financial services, having served at companies such as First American Financial Corporation and Bank One Corporation.
ADP Employment Verification Service is powered by The Work Number under contract with Equifax Inc.

 

 

ADP

 

Moderator:  Kira Lakin

March 19, 2014

1:00 PM ET

                               

Kira Lakin:                           Hello and welcome to today’s webinar, Tackling Today’s Employment and Income Verifications. My name is Kira Lee Lakin, Director of Marketing at ADP.

First, let’s review a few housekeeping items. This is one of a number of complimentary webinars that ADP offers to Tax, Finance, and HR professionals throughout the year. Today’s webinar will last for 60 minutes, ending at 2:00 p.m. Eastern Time. I’d also like to mention that today’s webinar is being recorded and you’re currently in a listen-only mode. If you’d like to download a PDF of the slides, follow the link provided in the chat window. If you have any problems downloading the presentation, just send a message into the chat window for assistance.

During today’s presentation, we will be asking for your feedback via a few polling questions, which will appear on the right-hand side of your screen once the poll has been opened. Please click on the radio button that corresponds to your answer to place your vote. There will also be a post-event survey that we’d very much appreciate your input on.

We’ll be answering questions during the Q&A section at the end of today’s presentation so feel free to submit your questions at any time during today’s webinar by simply typing your question into the Q&A panel, also located in the lower right-hand corner of your screen, and then click the send button to send your question into the queue. We’ll do our best to get all of them before the end of the program. Finally, once again, if during today’s webinar you experience any issues, please just enter a comment into the Q&A panel and our producer will respond.

So, before we dive into our presentation, I’d like to highlight just a few key facts about ADP. We have over 600,000 clients worldwide and we pay one out of every six employees in the U.S., which is just over 33 million. We’re also one of only four AAA-rated U.S. companies by S&P and Moody’s.

So, with that, I’d like to introduce our speakers. Today’s webinar is hosted by Deepak Mehta, Vice President of Employment Verification Services at ADP. Dee, I’ll now turn it over to you.

Deepak Mehta:                    Thank you, Kira, and a warm welcome to all attending today. We have an exciting topic to review with you over the next hour, something that is very near and dear to your employees and their hearts; a fast, secure, and accurate processing of the employment and income verification by their employer.

In this session, we will review market and regulatory impacts, the employment and income verifications inquiries are on the rise, and what impact do the markets have and the increased regulations have on these inquiries, the verifier perspective, risk-based decisions and fraud mitigations. How do you know who the verifier is? What are the risks of providing an employee’s sensitive information to an unverified verifier for non-permissible use? The employee consumer experience, life events requiring verification and the expectation of near-instant decisions. Your employees are looking for an instant decision, how you can enable that for them. Liability and industry best practices. Do you know who’s calling to verify the income and employment of your employee? And lastly, we are looking to save the last ten minutes or so for a Q&A session. So, with that, let’s begin by us asking you a question.

Kira Lakin:                           So, our first polling question here is; how do you handle your employment and income verifications today? The three options are; A, in-house; B, outsource; or, C, not sure. If you could just select the right radio button to send us your response.

Dee, do you have a sense for what you think you might see here?

Deepak Mehta:                    Well, if I was to guess, if I was a betting man, Kira, I think we would see somewhere between 30% to 50% of the audience generally processing the income and employment verifications in-house; kind of a correlation of general payroll HR services that the market generally outsources.

Kira Lakin:                           Interesting. Well, I guess we’ll find out. So, it looks like — go ahead, Marvin.

Unidentified Participant:    I was just going to say the poll’s closed and the results are shown.

Kira Larkin:                          I think you were right, Dee. I mean, it looks like we’ve got more than half of folks handling their income verifications and employment verifications in-house.

Deepak Mehta:                    Well, thank you. I got lucky today. Thanks, Kira. So, with that, our first section is around the market factors and regulatory impact that constantly affect you and your employees.

Generally, a recovering economy and a positive economic outlook is directly proportional to increased demand of employment and income verifications. Let’s look at the first one. The Fed is maintaining low interest rates; the Federal Reserve is watching unemployment rates and targeting a 6.5% rate of unemployment nationally as a trigger to scale back the stimulus programs that are helping keep interest rates near historic lows. Most Fed policy makers foresee the first significant rate hike in mid-2015 and, while the unemployment rate dropped to 7.3% last month, it’s still at the lowest level in four years and well above the Fed’s 6.5% target. What that means, again, is that would be a continued activity by your employees and us to look for mortgages, refinances, auto loans, etc.

The credit markets; mortgage refinance activity has tapered off. The harsh winter has also affected it but the market for new home purchases and equity loan appears solid into 2014 as long as low rates prevail.

But the real booming sector currently is auto finance. Loan volumes are trending upward and borrowers are taking on higher debt levels while delinquencies are remaining low. Based on our data, we see auto-related verification transactions up 78% from the same period a year ago. That’s a significant increase and also indicates the employees’ confidence level on the job and betting on the economy. That’s a great thing for your employee and economy in general but it also means you as an employer can expect increasing requests for verifications. Again, speed and accuracy of completing those matters to your employees is of essence here.

Job market; interestingly, voluntary separations, or quits, comprise more than half of all separations in the past 12 months, probably a sign of improving job markets according to Equifax Workforce Analytics. Some experts view quits as an indicator of increased consumer confidence in the labor market, confidence that they can find new or better jobs. In any case, those transitions often result in a new pre-employment screening and verification inquiry. Pre-employment screening is one of the primary verifier verticals that we serve via our work number service and our August transactions were up 10% year over year.

Also, as an employer, you want to hold on to your precious assets, your employees, and we believe value-add services like employment verifications project a positive image of your company to your employees and one of many reasons why they want to be with you and your company and not somewhere else. Despite the recovering economy and the above, many of your employees are still counting on the government benefits program, Some take advantage of welfare-based, need-based, Medicaid programs, etc. that already require verification of employment and income or will require it in the near future.

The increased regulations, again, mean increased verifications for your employees and for the employers and the obligations that you have. Over the last several years, we have seen an increased regulatory environment, which probably will be the trend over the next several years, too. We all have been affected by ACA over the last few years, along with our employees, and we can probably expect ongoing changes to that alone, which will continue to impact your employees and you as an employer. Increased income and employment verifications will be the new norm. At ADP, we offer the basic service for free to our clients with a nominal fee for social service verifications.

With that, I’m going to ask question number two to the attendees today. Kira?

Kira Larkin:                          Thanks, Dee. We’d like to know, have you noticed an increase in employment and/or income verification requests over the past 12 months? It would be great to get a sense for what our attendees are seeing themselves. So, the options are; A, yes, a lot; B, a little; C, little or no change; D, no, we’ve actually seen a decrease; and, E, I’m unsure.

Are you still a betting man, Dee?

Deepak Mehta:                    This one is tough, Kira. I suspect it depends on the size of the employer and if they have a centralized HR Payroll department or decentralized, especially on the larger employers with a vast geographical presence. My guess, again, is that 50% of the responses will indicate that there has been an increase in the number of verifications over the last several months.

Kira Larkin:                          Well, we just got our results in. And it looks like, yes, we’re about there. I mean, we’re seeing a lot of people saying, yes, definitely seeing a little bit of change and we are having some folks saying a lot. No one’s saying that they’re seeing a decrease. So, you might be on to something.

Deepak Mehta:                    Okay, thank you.

Kira Larkin:                          Great. Let’s move on.

Deepak Mehta:                    With that, I’d like to introduce our next speaker, who’s going to take a deeper dive into the business of employment verification. Steve Schulz is a Senior Director of Product Marketing at Equifax Workforce Solutions. He’s responsible for developing and executing marketing strategies that support the growth of the Work Number employment verification service. He is Go-to-market Strategy Leader in Employer Services, focused on value creation and client-centric product bundling for human resources and pre-employment screening service providers. With 15 years of experience in marketing and communications, Schulz has held key market-facing positions at companies ranging from Fortune 500’s to startups. He has extensive experience in financial services, having served at companies such as First American Financial Corporation and Bank One Corporation.

With that, Steve, I’ll give you the webinar.

Steve Schulz:                        Deepak, thank you so much for that introduction and, Kira, thank you for the opportunity to join the webinar today. To all that are on the call, we certainly hope that you find this informative. We hope there are some new insights that you’ll take away from it and just maybe a little shift in perspective on how we think about what verifications of employment and income mean to your employees, as their out doing things within their consumer lives.

So, with that, I want to talk a little bit about the verifier perspective. So, the question that often comes to mind is; why is a verifier asking the type of questions that they’re asking? What is it that they’re really trying to get to the bottom of? And so, effectively, any time that an employee is initiating a consumer-driven process; they’re applying for a loan for a mortgage or a new car or something like that, basically, there’s a lender on the other end of that equation that is looking to lower their risk. And the way in which they lower their risk is by aggregating more data on that employee. They’re trying to put together as holistic of a picture as they can so that way they can extend the best possible terms with the lowest amount of risk to the financial institution.

So, traditionally, there’s been heavy reliance on credit scores and credit reports, which is really what we would call propensity to pay or sort of; how have you historically handled your debt? But, increasingly, due to some of the regulation that Deepak referenced at the outset, as well as just some internal policies with a lot of lenders, they’re saying, “Let’s insert the income and employment data as well.”

So, the credit score will tell the propensity or history of how the employee has handled their debt but, now, they want to look at; are they still employed? So they make the amount of money that they’ve stated on the application for whatever the service is that they’re applying for? And, in some cases, a third layer that gets put onto this risk stack is really assets or collateral. So, in the case of mortgage, it could be the house itself as an asset or other types of wealth data, that sort of thing.

Generally, if it’s a big-ticket loan of some sort, mortgage and so on, the more complex this becomes. But, increasingly, even in what we would consider smaller-dollar types of lending or credit granting situations, the employment and income piece is becoming more and more prominent because lenders understand that they can use that to make a better risked-based loan decision.

So that’s what the lender is looking for. But how does that affect the employee as they’re out in their consumer lives? It’s interesting to think about, a lot of us on the call have probably in the last year perhaps refinanced a house, opened a new credit card, maybe subscribed to a new cell phone plan, or took out a loan for our kid’s tuition. All of these different life events, as we call it, are really going to increasingly require a verification of employment and income. Again, some of it’s driven by regulation; other, just driven by the lenders’ and credit grantors’ understanding that factoring in this information allows them to make a better-performing loan decision and to be able to extend their offer to a wider range of applicants.

And so, it’s an important thought, in that the average employee could easily require three to four verifications of employment in a given year. Now, some of those do roll into the HR office today. Or, if you’re using an outside provider to answer those questions, it’s going to a company like ADP to do that on your behalf. Other times, the question isn’t asked. And that’s actually the scarier part, is when that employment and income data could be used at the point of application to provide a better result for the employee but, if that step is sort of bypassed, what does that mean in terms of — is that going to result in a denial of service? Is it going to result in a higher interest rate? And I have an example that I’ll show you in a minute that kind of illustrates that.

So, one hypothesis that we look at is that personal finance is a big deal. It weighs heavy on all of us, certainly on the average employee. And there’s some research out there that shows that personal finances is probably a bigger stressor than some things that we might inherently think would be kind of on the mind of the average employee; health and relationships or just their workload.

And so, the verification piece, it certainly isn’t to say that a timely verification is going to be the end factor in whether or not the employee gets the new car or gets the mortgage loan. There’s a whole lot of other factors there. But, it’s one piece of the equation, an important piece, and when it’s done right and done quickly, it allows for that transaction to go through smoothly and hopefully that equals that that employee is coming back into work, they’re focused, they’re productive, and that’s one less personal financial worry that they’re dealing with that day.

So, as an example of how having this data available at the point of application is important, I want to take you through a scenario here. And a good way to think about this is you’re going in and you’re purchasing a new car and you’re going to finance it through the dealership and it’s a Saturday afternoon. So, you go in and you pick out the car that you want. And, really, we have a case of three different applicants here; so, Applicant 1, Applicant 2, and Applicant 3 as we look at these three columns.

Applicant 1, in that situation they have what would be considered a prime credit score or a FICO score above 720. At that point, they fill out the application for the loan and they’ll state, “I work at this location. I make this amount of money.” If stated income is okay per the lending arm that’s on the back end of that transaction — because the auto dealer at that point is going to reach out to their lending partners or sometimes it’s an in-house finance situation — but whoever has to approve that loan, if they’re okay with stated income which, in a lot of cases, they are if the credit score is high enough, then that consumer may walk away with preferred financing and they’re driving the car home that day.

Now, for Applicant number 2, their credit score isn’t quite as high. They’re considered sub-prime at a 620 FICO. So, now, when the Finance department says, “Let’s go to some of our lending partners and see who can provide this loan for the automobile,” they may get back something that says, “We’ll do the loan but you need to verify or confirm that the person has gainful employment. Are they currently employed? Is the income amount that they’ve stated on their application consistent with what you can verify with a third party?” So, if that information is readily available, within the context of that dealership right there, they can pull a credit report and they can pull data-based information on employment and income within in seconds, there’s a good likelihood that that employee would then get the best possible loan terms and, again, they drive away in the car that same day.

Now, for Applicant number 3, it looks a whole lot like Applicant number 2; same credit score band and they, too, get the requirement that says, “You need to verify income on this individual before extending the loan. But, when that information isn’t readily available, so let’s say that that data is not sitting on a database, not being provided by a company like ADP, now the challenge to dealership is, “Do I want to risk sending this person out to try to find a paystub or waiting until Monday until they can get to their HR department to get some evidence of employment?”

The problem for me, as a car dealer, is that if you leave, you may not come back. You might change your mind or maybe you find a different offer that you like better. So, I want to do this deal and, at that point, if there’s no regulation forcing me to go and get a third-party verification, a lot of times what will happen is the dealer Finance office will say, “Well, we’re just going to bump this person up to the next tier.” So, they may still drive home in car that day, but maybe it’s at 3.9% interest instead of 0.9% or whatever better deal they could have qualified for. And a lot of times in that scenario, the consumer or your employee probably doesn’t even know that they could have been eligible for a better offer. So, the employment and income data being available right at that point of application is really important.

One example that I like to point to when we talk about the value of a timely verification comes from a client that uses the Work Number service and this is Pacific Gas & Electric, which is a utility company based out of Northern California. And PG&E, essentially, it was a real-life example based on someone who works in their HR department who, prior to joining the team that was doing the verification work, she was trying to complete a refinance on her own home. And it took so long to get the employment verification back that she missed a rate lock and, at that point, the rates had gone up and so now there was a quarter-point higher. She was able to eventually lock in and do the refinance but at a quarter-point higher than what she would have qualified for if the verification were ready in a more expedient fashion.

A quarter-point maybe doesn’t sound like a big deal but when you’re talking about, over the course of a 30-year home loan, it can be thousands of dollars. It can be a very big deal. So, this is an example where Elaine, who was the Payroll Operations Manager at PG&E, said, “I really want to sue an outsourced service to make sure that my employees are getting this done faster and that they’re not running into this hurdle.”

And this allowed them to condense the turn time on providing these verifications from several weeks down to minutes, in the case of commercial lending. And then, even with their social service verifications, they went from several weeks down to less than a week for getting those turned around. So, a real good example of where they’ve improved the ability for their employees to go out and secure different goods and services that they’re looking for as consumers and not be disadvantaged by waiting for the verification.

And this just shows kind of some of the statistics around; with PG&E, they started tracking and looking at when do verifications come in? Average number of verifications by day of the week, average verifications by hour of the day. And, not surprisingly, a lot of business is conducted kind of on a Monday through Friday scale and a lot is in kind of normal working hours, if you will.

But I think what’s interesting to note is, there is activity that happens on a Saturday or on a Sunday at early hours and late hours. And, again, buying a car on a weekend is one possible example but it could also be applying for in-store credit at Home Depot or a store like that. Or maybe it’s a situation where the employee is applying for a new credit card online at some evening hour and they’re hoping for an immediate response. So, the ability for those lending institutions to factor this data in, in that immediate fashion, is the best bet that employee has to get the best possible offer.

So we wanted to take a minute and talk a little about liability and industry best practices. Verification of employment and income is interesting in the HR realm, in that in generally is not perceived as having the same weight as some of the other much more regulated functions that an HR professional has to contend with. So, when we think about things like I-9 filings and other types of HR functions where there is a direct penalty to not being in compliance or missing a step. When it comes to verifications, there really are very few scenarios where the employer is going to face a direct penalty for not completing a verification or not completing it in a timely fashion.

However, as we’ve illustrated, there’s a lot of instances where the not doing so, it’s an intangible effect, or I should say it’s harder to track, but we do think it is a contributing factor to employee stress, potentially, employee dissatisfaction. Or, perhaps, opens the door, if not handled in a really concise, secure, and efficient way, it does open the door to a different type of liability. Maybe not in the form of a fine from the government or something like that but there is potential for headline risk or for, even, legal action in the event that an employee’s information were to be handed out, personal, identifiable information given out to someone who is not really and authorized recipient of that; someone who is posing, if you will, as a legitimate verifier for a financial institution or a social service agency but, perhaps, isn’t. So, it is a place where we have to be careful and diligent.

Some of the best practices that we look at in terms of any verification program should really try to adhere to; speed, as we’ve talked about already is certainly very important. What that means in terms of the employee’s satisfaction level, there’s not the wait for them and, potentially, it has a financial impact for them.

Consistency; the idea that, if it’s a consistent replicable process, that’s the best bet that, if you ever have to go back and audit and say, “Who was information given out to? At what time?” there’s a nice clean way to monitor that. It’s not, some are done by phone, some are done by fax, some are done in a regional office, some are done at the headquarters office. So, it’s important to have consistency in your process.

Authentication; this is really addressing the idea that having a reliable means of validating the identity of both the entity and the individual that’s requesting the data is really important. So, again, we’ve encountered experiences where you could have a private investigator, an ex-spouse, or someone that’s posing and saying, “I’m calling from such and such loan company and trying to verify employment on this employee.” Completely not a situation where that information should be given out but, if it all sounds pretty legitimate, then an HR professional may think, “This is fine. I’m going to provide this information. I’m helping my employee in doing so.” When, in reality, there is just really no proper authentication on both the entity, as in “Who is this lender?” and then also even to the individual level, “Who within that organization actually received that information and should they have received it?”

Automation; automation is in all aspects of life we kind of live in an internet age and we’re looking for immediate results as employees and as consumers. And automation really is what drives that. Increasingly, verification services that go to the large lenders or to the government entities, they’re looking at automation from their side and saying, “Who can we go to that can provide this information for us in the most streamlined way?” They really don’t have a lot of the time and luxury of trying to make phone calls or trying to send faxes or emails to perform verifications.

So, to the degree that you’ve put your employees’ information into a centralized and secure data source where it can be retrieved in an automated and secure fashion, that’s really the automation step that is offered to you by an ADP that you don’t have to invest in that and that technology or that infrastructure. You’re able to benefit from that service and remove the burden while putting a real advantage in place for your employee.

And then, lastly, reporting. We all want the ability to know what’s going on as we’re handling information. And services like this, basically, are going to allow you to have some insight into the number of verification requests that are coming in and, in the event that it’s ever challenged, an employee says, “Why did my information go to so and so?” there is a clear way in which that can be tracked back and we can find out exactly who the information went to and what their permissible purpose was for receiving it.

So, the permissible purpose I just mentioned is really important in this equation. When we talk about compliance for verification of employment and income through ADP, FCRA compliance is top of mind. So, FCRA is the Federal Fair Credit Reporting Act. And, essentially, it’s a rule set that says there are really only certain circumstances under which someone should be able to get information on another consumer and those are very tightly defined under Section 604 of the FCRA.

Every time that, whether it’s a social service agency or a lender or a property management company, any of the entities that could be coming to a service like this and saying, “We want to check employment and income on this individual,” they’re going to have to have an FCRA-permissible purpose in hand in order to do that. And, generally, those purposes are things like for the extension of credit, to offer employment, to pursue a delinquent account, or for purposes of checking the account to make sure it’s still in good standing. But there’s got to be a permissible purpose there, as defined by FCRA. All of the verifications that would be done through our service, verifications of employment or income, must meet that threshold.

Additionally, there is the issue of consumer consent. So, not only does the verifier need to have a clear permissible purpose, but they should have some sort of consent instrument, at which point that employee said, “This is okay for you to go and check my information.” And, generally, when that happens, it’s a signature. Sometimes it’s an electronic signature or an ink signature, some sort of acknowledgement that the employee does at the point of application for a service.

So, a good example of this is the Fannie Mae 1005, which is sort of a universal form that almost every mortgage lender in the country uses as part of their verification of employment process when they’re putting together a mortgage loan. So, when the employee signs that Fannie Mae 1005, they’re acknowledging that it’s okay for the bank to go and check employment and income data through their employer or through a third-party source or wherever that information is housed.

In the event that there is ever question as to, “Why was my information released to this company?” again, there would be a clear trail to where we could point back and say, “Did that verifier have that consent instrument? Did that verifier have permissible purpose?” And then, that gives you security to know that your data is not going to be released, your employee’s data is not going to be released to anyone who shouldn’t receive it.

Kira Lakin:                           Great. Thanks so much, Steve. Let’s take a quick break there to move into our third polling question. We’d like to know; how do you confirm the identity or the organization requesting a verification? And when you receive a request how do you verify the organization who’s actually sending you that request? So, A, you can request a cover letter; B, look up their phone number independently and then call the requesting company; C, just rely on good sense based on the initial phone call; and then, D, drive to their location and perform an onsite inspection.

So, again, you should see that polling window pop up for you on the right-hand side. Just let us know which you currently use.

Steve, I know we ask if folks drive to locations of the requestor. But is that kind of a cheeky response or are we actually expecting someone to say that they do, do that?

Steve Schulz:                        Well, Kira, I’ll be surprised if they do. But it might be interesting for the audience to know that the ADP service as powered by the Work Number, part of the credentialing process that we perform on verifiers does include onsite inspections. So, we actually have teams that are going to go and validate, as we’re onboarding a new verifier client, to understand that, not only does everything check out in terms of their licensing and industry codes and do they appear to be in the business that they say that they’re in, but we’ll put boots on the ground, so to speak, to make sure that these are legitimate verifiers in the legitimate businesses that they represent themselves as and not seeking some other data for some other purpose.

Kira Lakin:                           Very interesting. Well, I will tell you, we have one person respond that they do drive to the location. So, we may need to figure out who that is and have a chat with them because they’re obviously very dedicated.

Steve Schulz:                        That’s right. They are doing their diligence.

Kira Lakin:                           Very good. Okay, well let’s move on to protecting employee data.

Steve Schulz:                        Sure. And if we could kind of flow in the data points there. It doesn’t want to come up for us.

Kira Lakin:                           No, it doesn’t. I apologize.

Steve Schulz:                        No, you’re okay. Let me jump ahead to that just so I have my visual cues here, Kira. One second for me, sorry. Really here, this is where what we’re talking about in protecting employee data. And apologies to the folks on the line but you’ll see this if you download this presentation later.

Kira Lakin:                           There we go.

Steve Schulz:                        There we are. Thank you. So, identity theft and fraud is a huge consumer problem in the United States. It’s a huge problem globally but we certainly know that identity theft has become the country’s number-one consumer fraud issue, according to the FTC. And some of the other stats there reflect where this is something that, as employers, we really want to be diligent in protecting data so there’s no way that we’re complicit in anyone putting our employee through the nightmare of trying to untangle an identity theft issue.

So, having secure process and methods around providing verifications in a way that doesn’t really leave — you know, I noticed on some of the poll responses where we say, request a cover letter, rely on good sense — definitely important in everything we do to try to find pieces of validation like that. But the fraud schemes are so complex and sophisticated these days that it’s really not enough to require an additional cover letter or something like that. That could still open up to liability in that; a lot of the things that we see today with online phishing scams and other types of fraud like that. A lot of these things look pretty real and the folks that are in the business of doing this certainly do their homework and they know how to mimic the look of a Citibank or a Wells Fargo to try to fool someone into giving them pieces of information. So, really important to take a multi-layer approach to protecting data.

So, some of the things that we look at when we talk about; how are we protecting the employee’s data? It’s authenticating the verifier. And so, as I mentioned, the independent validation work of the inquirer’s identity prior to providing a verification; this is important. And it’s very tough to do that, obviously, if we’re trying to also meet that threshold of putting the data at the point of application in order to give the employee their best shot at the services that they desire as a consumer. So we’ve seen kind of the importance of time in turning these around. But time could be contrary to, “Let me check this person out, this requestor out, and make sure that this is a legitimate verification request that I should be responding to.”

Well, when you put the data with a company like ADP, what you’re doing is you’re relying on that checking out or vetting of those verifiers. That happens well before they ever are able to come through with a request. So, there’s no delay in the information getting into their hands because we know ahead of time that they’ve been screened and that they are in good standing and these are legitimate verifications that are going to take place.

A legitimate verifier should always have details on the employee that they are trying to verify. So, is it a fishing expedition or do they have details? Do they have that consent instrument? If they’ve got a signed loan application, they should definitely have some more points than just an employee’s name or social security number, in order to give some validity to whether or not they are truly verifying and not just probing.

And then, lastly, relative to legitimate purpose, that was kind of the points I raised earlier around relying on a framework like the FCRA is really useful even if you’re not bound by it as credit reporting agencies are. Using it as a yardstick makes a lot of sense because it really limits the number of possible rationale for someone to request and receive a verification.

So, on this slide, challenging questions that arise. I wanted to just provide a simple illustration where this is the kind of thing that can create a real hurdle or potentially trip up an HR professional that isn’t necessarily looking at the verification market and the mortgage lenders and auto lenders on a regular and daily basis as an outside trusted provider, a data steward is.

And, really, a good example of this is the Fannie Mae 1005 that I mentioned earlier. This is a document that’s used in part of the underwriting of pretty much every mortgage transaction that happens, whether it’s a new home purchase or a refinance. And, when the bank is trying to fill this in, there are a number of fields on this form. Some of the trickier ones are questions around; what’s the likelihood that this employee is going to continue their employment? What’s the likelihood they’ll receive a bonus? When are they going to receive their next pay increase? And what’s the amount of that next increase?

This is a situation where, as an employer, you may not want to answer these questions. It could create liability for you with the employee. It’s pretty tough sometimes to say definitively, “This person is going to continue employment or they’re going to see a raise on X date.” But this is where a third-party provider could provide the guidance to say; it’s okay to not answer that question but don’t leave the field blank. The response would be something along the lines of, “Data not provided by company policy.”

So, just something that simple could mean the difference between whether or not that loan is going to get halted and then there’s going to be continued calls back to the HR department to try to get an answer to that question or, if by answering it in that way, it’s enough for the verifier to, the lender to say, “This is fine. We know we’re not going to get this information so we can move on with this loan package.”

Because that’s really what they’re trying to do from a compliance standpoint, as we talked about earlier with the Consumer Finance Protection Bureau and a lot of the new regulation that’s on the lenders, they have to check a lot of boxes and the only way they can do that is making sure that these forms are completely filled out. So, if you understand sort of their motivation and what they’re trying to accomplish but then also understand what the right answer would be that doesn’t create liability for you, that’s where a company like ADP can help with that.

Kira Lakin:                           Great. Thanks, Steve. Well, that moves us into our fourth and final polling question. Are you considering outsourcing your employment and income verifications?

So, basically, now that you told us, Steve, all about all the things that they should be aware of, it will be really interesting to see kind of how folks feel about whether or not it makes sense for their business to outsource.

So you should see that window pop up on the right-hand side. Just select the radio button that corresponds with your response. We’ve got A, yes; B, no; or, C, I’m still not sure. And then those results will take just a few seconds to collate.

So how about you, Steve? Any guesses as to what we’ll see here?

Steve Schulz:                        Well, I’m hopeful that we’ll see a pretty good indication toward yes. I think this is really just a nice, easy almost, if I dare say the word, way to do something that benefits the employee and really benefits the employer without a whole lot of effort or cost around it. And so, hopefully, we’re proving that out.

Kira Lakin:                           So, I know we talked a lot about the different reasons that it makes sense to outsource but are there any considerations that a company should think about specific to in certain situations does it make more sense than in others to outsource? Or do you really see it as something that’s more or less across the board?

Steve Schulz:                        Well, a lot of times an employer client will say, “You know, we’re not that big of a company. We don’t really get that many of these requests. This is a problem for an employer that has hundreds of thousands of employees and they’re just inundated with requests coming in and it’s more of a removal of a workload burden.” That kind of thought. And that is true and those large companies, large organizations, certainly do benefit from it in that way.

But, I guess what I would say, Kira, is that even to an employer that has very few employees, when we talk about those liability issues, when we talk about if we’re trying to make this process of doing these verifications as quick as possible and, yet, not open ourselves or our employees up to any liability or potential identity theft or other things of that nature, then there really isn’t an employer size, if you will, from a population standpoint, where this is more relevant than it is for another when it comes to those issues. So I think employers of all size really, in light of kind of the way in which the verification business is going and the number of times that those questions are going to be asked of employees as they’re out in their consumer lives, I think that, really, all companies should be thinking about that.

Kira Lakin:                           It definitely makes sense. Well, with that, let’s go ahead and move into our Q&A session. So, again, there’s a Q&A panel on the right-hand side of everyone’s console today. And if you want to go ahead and submit any questions that you may have, we will try and get to everyone before the end of the hour.

So, Steve, let me start you off with one here. I guess this person is handling their own verifications and they’re asking; as far as that consumer consent piece, how long is that authorizing signature really good for? Because this particular person has been asked for information but the signature that was given by that employee is several years old.

Steve Schulz:                        Yes. Generally with consent, it is a life of loan or the life of the obligation type of timeliness around consent. That being said, depending upon, if the employee has signed an application and there’s a specific — it specifies in there that you can only check my employment and income data once or only during a certain timeframe, then that’s a different scenario. But, as most service applications are written, that a lender or a property management company or someone would use to collect consent, the general rule and under FCRA the rule would be that that data could be verified at that point and then potentially at a later point as well assuming that that still is an open account; it hasn’t been paid off in full or closed or that sort of thing.

Kira Lakin:                           Very interesting. That last slide that you had about challenging questions, it sounded like there were some types of questions that employers really aren’t necessarily obligated to answer but, of course, working with an outsource provider they would have that resource available to them. Let’s say that an employer is still handling these verifications in-house, how should they be answering these questions about expected bonuses, or expected terms of employment? Is there any guidance that you can give there?

Steve Schulz:                        Well, Kira, I’m certainly not a labor attorney or someone who could dispense advice in that way. But, what I can say is, there certainly is a line between trying to respond to these questions that we know that, because a lot of them are regulation-driven that the lender is kind of compelled to ask, if you will, there’s definitely ways in which to answer some of these questions that prevent the employer being in any way liable by the statements that they make but, at the same time, facilitate that loan or whatever that application is moving forward without a lot of hold-ups or hiccups.

So, it’s difficult to address as an individual company that’s trying to deal with this. We have teams of folks that are looking at federal law, state law, different regulations, working with regulatory bodies like the CFPB or the government-sponsored entities of Fannie Mae and Freddie Mac to understand their guidelines, why they’re putting forth the questions. And so, the closeness, if you will, that professional service firms have to those markets and to those regulators probably helps us have a little more insight into when do you have to provide an answer, even if it’s not a definite yes or no, versus when is it something that truly could be left unanswered and it’s not going to be detrimental to the employee.

Kira Lakin:                           Yes. That’s definitely an important point is, on the flipside, if you don’t respond, I’m sure there’s always going to be a concern on the employer’s side that might actually hurt the employee’s situation.

Steve Schulz:                        Absolutely.

Kira Lakin:                           Great. Well, let’s see. So, for phone verifications, I have a question here from someone who’s saying that they don’t provide income information but just basic employment status verification when they’re receiving requests via the phone. Is there any kind of guidance or best practices that you can give for phone verifications specifically?

Steve Schulz:                        Well, income verification data or salary data is certainly, I think, most people would agree is a more sensitive end what could be included in employment and income verification. But, even providing a confirmation of where someone is employed, whether it’s not providing the full level of salary detail but just confirming that they are employed at an organization, the problem there is that, if you don’t truly know who you’re giving that information out to and you don’t really know what their motive is behind that, you could still be contributing to a situation that could be resulting in identity theft.

And what I mean by that, Kira, is that a lot of today’s fraudsters, they’re not looking to go to one place and try to get all the pieces of data they would need to steal someone’s identity or open a credit card in their name or something, from one source. But, they’ll piece together multiple pieces of information. So, if they can get one piece of data here and one piece of data there, then they effectively build a profile, if you will, and, at that point, they have all the data points they need to start to assume someone’s identity.

So, even providing the basic employment data confirmation over the phone — I’m not trying to say that’s always sort of the underlying reason or that that’s the common example of what’s happening. But, even one of those would really not make for a good situation for the employee or the employer if, in fact, that was really the root cause of that question, if it’s someone that’s trying to perform some sort of identity theft.

Kira Lakin:                           You know, that’s an interesting point because I’ve got quite a few questions on that same topic of phone verification. We’ve got someone else who’s saying that, over the phone, they’ll only really release the date of hire and position verification but then, for income verification, they do require a signature. And so they’re asking; should they really be changing this practice to request signature authorization for any personal info at all? And it kind of sounds like what you’re saying is, yes.

Steve Schulz:                        Yes. I mean, ideally if you’re working with, again, a third-party outsourcer that’s doing a heavy amount of credentialing and verification and auditing and monitoring work on the verifiers prior to them ever being able to come into the system and ask the question, then there’s a little more of the way in which that verification of employment data can flow across to them is in a much more streamlined fashion because they’re a known quantity, a known entity, to the parties involved at that point. But, in the event that it’s something that’s coming in via the phone or the fax machine, if you’re handling those in-house and in that way and, again, I’m certainly not dispensing legal advice here, but it certainly would seem to reason that the more assurances that you have that it’s a legitimate request, the better and, even if you’re releasing very minimal information.

Kira Lakin:                           Thanks. From an employer’s perspective, are there any types of verification that legally must be responded to so they are legally obligated to respond?

Steve Schulz:                        You know, the only one that comes to mind for me, Kira, is child support enforcement. So, there are, within every state, there is a child support enforcement entity, usually as part of a Department of Children and Family Services or Health and Human Services type entity that, basically, in the event that an employee, they owe child support, there has been a court decision rendered that says they’re supposed to pay a certain amount of child support, if that employee is not current on that, the enforcement agency could go after them and try to find their place of employment. And then sometimes that’s in order to reach out the individual directly or other times it’s to start a garnishment process directly with their HR department in order to get those child support funds moving into the party that is supposed to receiving them according to the court judgment.

So, in those scenarios, that’s really a type of request that cannot be ignored, if you will. And sometimes there are specific timelines around; by ten days, or that sort of thing of receipt, in which the employee needs to respond. So, as part of using a comprehensive service from an outsource provider, social services is part of that, child support enforcement is part of social services. So, that gets taken care of by the outside provider.

Again, in the event that the employer was doing it on their own, that would certainly be the one scenario that should really be looked as a little different than other verifications. But, I think, as we’ve talked about on the call today, even if that’s the only scenario where you’re legally required to respond, the not responding or the responding slowly can really be a disservice to your employees in all of the other verification scenarios that extend beyond child support.

Kira Lakin:                           That certainly makes sense. Dee, I’ve got a question for you. You covered off on this a little bit during your slides up at the beginning but you covered quite a few reasons employers may see an increase in verifications. Are there any others may be aren’t quite as major but still employers should be aware of?

Deepak Mehta:                    Thanks, Kira. I think one is just the natural phenomena of life that happens, which is consumers like us, employees are also consumers, like Steve mentioned, are applying for auto loans, home equity loans, mortgages, credit cards, student loans, etc. The verifications go for all type of mortgage consumer lending businesses and then they also expand towards the family assistance program that a state or the federal government may be administering. And while we listed a few, there could be the welfare programs, which include food stamps, etc., the increased Obamacare or ACA regulations on the state where Medicaid is being taken over by ACA, more or less, also sees an increase in verification.

And then you also have families that are gainfully employed but are considered families qualifying for needy family assistance programs where the family income level is not enough. And they could also be applying for need-based paid through the state or the federal programs per se. And then there is the student loans aspect where the parent loans etc. or student loans that may be happening also. So I think you will find that wide variety of interactions in our lives eventually lead to an income and employment verification that includes job title and income details, etc.

Kira Lakin:                           Great, thanks so much. Well, that actually brings us to the end of the hour. So, again, if there are any questions that we didn’t get to today, we will be reaching out to follow up and make sure you get those addressed.

I’d like to invite everyone to follow us on our blog at ADPcomplianceinsights.com. This is where we archive all of our past webinars. We also list upcoming sessions that you can register for and we post regular updates on various topics that we feel may be important to you. And again, we really appreciate your feedback on how we’re doing so please tell us how these programs can be made to be more valuable to you as you fill out today’s post-event survey.

Thanks again, Dee and Steve, for all of your insights. And, to all of our attendees, thanks for joining us. Have a great day.

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