The Fair Credit Reporting Act (FCRA), passed by Congress in 1970, is designed to ensure the accuracy and privacy of personal information filed by credit reporting agencies. It protects consumers – or in your case, candidate or employee – information from being used without their notice and consent.
As an employer, violation of the FCRA can subject you to costly civil or even criminal liability. So, be sure you understand the law and all its implications as they apply to your business.
More on FCRA
The FCRA is broad legislation that applies to your use of an outside agency to obtain consumer reports on applicants or employees. Information in these reports might pertain to an individual’s credit history, criminal background, motor vehicle record, or workers’ compensation history, among other areas.
- You must follow all FCRA requirements when obtaining consumer reports. Before beginning this process, you are required to provide written disclosure to your candidate or employee and obtain their written authorization. You also must provide certification of compliance that these steps have been followed.
FCRA and Adverse Decisions
If you use information from a credit report to make an adverse employment decision of any kind, you are subject to additional FCRA obligations. These include:
- Providing a candidate or employee with a copy of their report and a description of their rights under FCRA.
- After use of the information, providing them with a written explanation including notice of the adverse action, contact information for the agency that produced the report, and statements that further detail their rights at this point.
Other Areas to Consider
Consumer reports that contain medical information and penalties for non-compliance also are important considerations.
- FCRA prohibits a credit reporting agency from furnishing reports containing medical information without prior consent on the part of the consumer. Also, be aware of any limitations as directed by the Americans with Disabilities Act (ADA), the California Confidentiality of Medical Information Act, or similar legislation.
- Civil penalties for FCRA violations can include nominal, actual, or punitive damages. Criminal penalties may apply when someone knowingly and willingly obtains information under false pretenses.
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For all your background screening and drug testing needs. We can help you develop a customized strategy to ensure your company stays current and compliant on FCRA, as well as all other local, state, and federal requirements. Read our related posts or contact us today to learn more.