FCRA-Compliant Background Checks for Employment
December 18 2023
Employment background checks are a standard practice for most businesses these days. Employers expect to run the standard services, and applicants expect to wait a couple of days for results. But if you’re new to the background check world, you might not be sure what happens in that murky middle. Without guidance, it can be a compliance nightmare.
Businesses need to ensure that their background screening procedures are accurate and thorough to comply with the Fair Credit Reporting Act (FCRA). This legislation sets out the requirements that companies must adhere to when conducting pre-employment screenings. Here are some key points for employers to understand about FCRA-compliant background checks.
Understanding the FCRA and Background Checks
Though some laws differ from state to state, FCRA compliance is crucial to the background screening process no matter where you live in the United States. The Fair Credit Reporting Act was enacted in the United States in 1970 to promote fairness, improve the accuracy of consumer reports, and ensure privacy for data used by consumer reporting agencies. The federal law establishes strict guidelines for obtaining and using consumer credit reports, including criminal records and other information used during the hiring process.
FCRA requirements also give candidates certain rights. The Summary of Rights allows consumers to access their reports, dispute inaccurate information, receive full file disclosure, and more. They allow an employer to use a background check report to make a good hiring decision while also protecting an applicant’s right to maintain an accurate and secure credit profile.
The FCRA was enacted in
1970
FCRA-Compliant Background Checks:
- Establish purpose
- Provide disclosure
- Obtain authorization
- Initiate adverse action
Understanding the FCRA and Background Checks
Though some laws differ from state to state, FCRA compliance is crucial to the background screening process no matter where you live in the United States. The Fair Credit Reporting Act was enacted in the United States in 1970 to promote fairness, improve the accuracy of consumer reports, and ensure privacy for data used by consumer reporting agencies. The federal law establishes strict guidelines for obtaining and using consumer credit reports, including criminal records and other information used during the hiring process.
FCRA requirements also give candidates certain rights. The Summary of Rights allows consumers to access their reports, dispute inaccurate information, receive full file disclosure, and more. They allow an employer to use a background check report to make a good hiring decision while also protecting an applicant’s right to maintain an accurate and secure credit profile.
The Significance of FCRA Compliance
FCRA compliance isn’t simply a suggestion or a good thing to do to protect candidates. Failing to follow FCRA regulations during the background screening process can lead to severe legal penalties, ranging from hefty fines to major lawsuits. Legal consequences often come in the form of regulatory agency actions, civil lawsuits, and even criminal charges.
In addition to consuming your valuable time and resources, non-compliance can tarnish your company’s reputation and credibility. The negative fallout from a hiring process that fails to comply with the FCRA extends beyond legal repercussions. It impacts client relationships, employee morale, and overall public perception.
Ensuring you get FCRA-compliant background checks is essential to protecting your company and fostering a positive work environment.
What are FCRA Background Checks?
FCRA-compliant background checks follow guidelines established by the FCRA. To comply with the FCRA, a background check report must uphold every right given to candidates. Getting a third-party, consumer reporting agency background check is the best way to ensure compliance, protect consumer data, and improve accuracy. Aspects of a CRA background check include:
Employers must disclose their intent to run a background check before screening candidates to maintain FCRA compliance. They should provide the disclosure form as a standalone document, written clearly and concisely. This document cannot include any unnecessary information, like liability waivers or state-specific background check information.
After disclosing a background check, employers must receive written permission from a candidate that explicitly acknowledges and authorizes the background check request. Like the disclosure form, the written consent document should not include a liability waiver. However, employers may include state-specific background check information. They can also ask candidates to acknowledge they received their copy of “A Summary of Your Rights Under the Fair Credit Reporting Act.”
If an employer decides not to hire an applicant due to information found on a background check report, they must follow the adverse action process. A standard adverse action process looks something like this:
- Send the candidate a copy of the background check report and a pre-adverse action notification. This will inform the applicant that information contained within the background check results may disqualify them from employment. The notification should include the name and contact information of the consumer reporting agency that conducted the check. Importantly, the notification must mention that the third-party screening vendor did not play a role in the hiring decision and does not know the reason for the decision.
- Provide candidates with their Summary of Rights. They should know their rights under the FCRA, including the right to dispute the report. Depending on where they live, they may also have additional rights based on state and local regulations, such as fair chance hiring laws.
- Wait the appropriate amount of time before making an employment decision. This is typically five days, but it varies based on the job location and address of the candidate.
- Once the waiting period is over, assuming the candidate has not initiated a dispute or provided additional information on results found on the background check report, proceed with the final employment decision. Send the applicant an adverse action notice to communicate the hiring decision.
How to Run an FCRA-Compliant Background Check
Step One: Establish Purpose
Before the screening process begins, an employer must establish a permissible purpose. According to FCRA section 604(a)(3), some available permissible purposes for consumer reports include credit, employment, insurance, and rental housing. Typically, screening a candidate or employee for a position or promotion at a company will fall under the category of “employment purposes.”
Step Two: Disclose Details
Provide a standalone, written document to candidates that clearly discloses that a background check will take place and may be used to make a hiring decision.
Step Three: Get Written Consent
In a separate standalone document, obtain written permission from the candidate to perform a background check.
Step Four: Follow Adverse Action Process
If information appears in a background check report that may impact your hiring decision, follow the adverse action process.
Ensuring FCRA Compliance in Background Checks
FCRA-compliant background check reports follow rigorous standards. This is why employers need to ask a consumer reporting agency (CRA), specifically an accredited professional background screening company, to run the background check. As you search for the right background screening vendor, ensure they have an FCRA-certified staff.
The best consumer report background check companies will help you maintain records, process your written authorization and disclosure forms, and help you adhere to the proper adverse action procedures. With a great professional background screening partner and trusted legal counsel in your corner, your company will have a much simpler time with FCRA compliance.
Real-World Examples of FCRA Compliance
Just how important are FCRA background checks? Let’s look at what happened to Uber when the ride-sharing company failed to comply with the FCRA. In 2017, Uber agreed to a settlement of $7.5 million with the Federal Trade Commission (FTC) over allegations that the company’s background check process violated FCRA regulations. The case made major headlines, highlighting the impact that non-compliance can have on organizations.
FCRA-compliant background checks are crucial for companies like Uber that rely on the trust and safety of their users. While Uber’s size helped it to recover, it still had a strong impact on its reputation. For many companies, a similar settlement would be enough to do severe damage. FCRA compliance protects both the interests of the company and the rights of the individuals being screened.
Uber's 2017 FCRA settlement
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By following FCRA background screening regulations like written consent, clear disclosure, and informing candidates of their rights, companies maintain a high level of trust while also mitigating legal risks. Running an FCRA-compliant background check in-house is possible, but it is extremely risky. It often creates unnecessary complications for businesses that already have a lot on their plates.
InfoMart, a PBSA-accredited background screening organization, has dedicated over 30 years to developing background checks that you can trust. Our team of FCRA-certified specialists monitors screening regulations across the nation, offering customizable screening solutions with built-in compliance. When you work with us, your company will have the freedom to focus on its mission and leave the other stuff to us.
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About Tammy Cohen
Tammy Cohen, an industry pioneer and expert in identity and employment screening, founded InfoMart 30 years ago. Deemed the “Queen of Screen,” she’s been a force behind industry-leading innovations. She was most recently the first-to-market with a fully compliant sanctions search, as well as a suite of identity services that modernizes talent onboarding. Tammy revolutionized the screening industry when she stepped into the field, developing the first client-facing application and a due diligence criminal search that has since become standard for all background screening companies. Cohen has received national awards and honors for her business and civic involvement, including Atlanta Business Chronicle’s Top 25 Women-Owned Firms in Atlanta, Enterprising Women Magazine’s Enterprising Women of the Year award, the YWCA of Northwest Georgia’s Kathryn Woods Racial Justice Award, and a commendation in the 152nd Congressional Record.
About InfoMart
InfoMart has been revolutionizing the global background and identity screening industry for 30 years, providing businesses the information they need to make informed hiring decisions. They develop innovative technology that modernizes talent onboarding, including a first-to-market biometric identity authentication application and a verified sanctions search. The WBENC-certified company is a founding member of the Professional Background Screening Association, and they have achieved PBSA accreditation in recognition of their consistent business practices and commitment to compliance with the FCRA. The company is dedicated to customer service, speed, and accuracy, and it has been recognized for its success, workplace culture, and corporate citizenship with over 45 industry awards. To Get the Whole Story on InfoMart, please visit www.InfoMart-USA.com, follow @InfoMartUSA, or call (770) 984-2727.