By Katie Kulp


As published to People 2.0’s blog:

Understand the FCRA.

The Fair Credit Reporting Act (FCRA) is a federal law that protects consumers and their credit information when it is reported through a Credit Reporting Agency (CRA). The act was designed to achieve accuracy and fairness for consumers and to maintain confidentiality, relevancy, and proper utilization of their information.

Understand how the FCRA affects employers.

FCRA Ribbon
The FCRA applies to all employers performing background checks through a CRA. Unbeknownst to many organizations, consumer reports include employment background checks. And, for an employer who values hiring top notch workers as much as it understands the need for workplace safety, background checks are a must these days. In fact, this practice is most likely a “given.” As noted in a previous blog post, ninety-six percent of organizations conduct some type of background investigation on candidates. Due to the detailed nature of these checks, companies rely on the results to predict if an applicant might be an honest and dependable staff member or, more importantly, to decide if he/she might be an avoidable threat to their business and current employees.

That said, performing valuable background checks comes with responsibilities. One of these responsibilities is adhering to the FCRA. If non-compliant, an employer can anticipate being involved in costly litigation.

Know that consumers are very much aware of this self-protecting law.

Organizations are facing an increasing number of lawsuits today due to FCRA violations during the applicant background screening process. In 2016 alone, almost 4,000 FCRA lawsuits were filed by consumers. That’s a steep increase from recent years – compare to an estimated 2,500 in 2014 and 1,300 in 2010. This escalation reveals it’s become painstakingly obvious that FCRA litigation is growing rapidly. Consumers are becoming more aware of their rights and are quickly advancing their interest in making employers pay the price for related violations.

Recognize that knowledge of screening risks is critically important.

So, are background checks even worth it? Absolutely. Without a background check of some sort, an employer blindly hires someone who has the potential to cause unlimited harm. Even still, the expanse of legal landmines surrounding employment screening is growing and it is now more important than ever for employers to understand all the related risks. When armed with the necessary knowledge, companies can minimize their chance of becoming a target of one of those 4,000 FCRA lawsuits while still protecting their people and assets.

Put measures in place to minimize employers’ FCRA risks.

Employers need to be aware of the most common pitfalls for technical violations that could land them in court. Consider these 7 best practices to minimize risk:

  1. Make sure you have a permissible purpose – Section 604 of the FCRA explains every permissible purpose for which someone can request a consumer report. “Employment purposes” with permission from the applicant is accepted. Do not perform a check on someone that you simply want to know more about. This would be a violation of the FCRA.
  2. Provide a certification to the CRA – Certify compliance to your CRA that you have 1) notified the applicant and obtained permission to perform the check, 2) complied with the FCRA requirements (including having a permissible purpose), and 3) that you will not utilize any discriminatory practices in accordance with any state or federal equal opportunity employment laws. Plus, ask your background screening provider about providing a certification every time you perform a background check. They should have a mechanism in place to allow this capability.
  3. Provide a compliant applicant disclosure form and obtain an authorization form – Before requesting a background check, an employer must disclose to the applicant that they intend to obtain the report as well as obtain permission via the authorization form to do so. You can refer to recently released guidance from the Federal Trade Commission (FTC) on how to keep your disclosures and authorization forms simple and compliant.
  4. Follow the adverse action process – There are employer responsibilities pertaining to denying employment (or taking any negative action against an applicant/employee) based in whole or in part on the results of the background check. You must provide the proper notices to applicants; if you are not sure what these are, ask your background screening provider or review the adverse action letter legal obligations.
  5. Properly dispose of Consumer Reports – Section 628 of the FCRA contains regulations surrounding the proper disposal of consumer report information. The FTC also released guidance on how to properly dispose of the data.
  6. Send copies of reports to applicants when requested – Always include a copy of the consumer’s Summary of Rights with the background check.
  7. Beware of state and local law nuances – In addition to the FCRA, be aware of state and local laws about employment screening as you perform background checks. Those laws could alter your sequence of events during the hiring process as well as the paperwork involved.

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About the Publisher:

People 2.0 is a full-service Business Process Outsourcing provider, offering a comprehensive set of financial, administrative, and regulatory services to the companies across the entire Human Capital Services industry. The information presented in this article is not legal advice from People 2.0, is not to be acted on as such, may not be current, and is subject to change without notice.


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