ECO Tip of the Month Employers: Remember to follow the Pre-adverse/Adverse Action process to ensure your compliance with the Fair Credit Reporting Act (FCRA).

Recently a large background screening firm was slapped with a $2.6 million civil penalty by the Federal Trade Commission for violating FCRA regulations. One of the crucial sections of the FCRA they were found to have violated was the applicant pre-adverse/adverse action process. When an employer elects to take adverse action (i.e. chooses not to hire an applicant) based on a background screening report the employer is legally obligated to inform the applicant in writing and provide them with an opportunity to dispute the information, should it be erroneous.

Below are specific instructions employers must follow to ensure they are complying with the pre-adverse/adverse action process:

 

Pre-Adverse Action

Provide the applicant with a copy of his/her background report, the pre-adverse action letter, and the “summary of your rights under the FCRA” hand out. You will need to customize both the pre-adverse and adverse action letters, with your contact information, the date, and the name of the applicant. It is of the utmost importance that you keep track of the dates associated with the pre-adverse action letter and the adverse action letter; this is to afford the applicant an opportunity to dispute the accuracy of the information, if they wish to do so.

Adverse Action

After 5 business days pass, if the applicant has not disputed the information or concedes that the background report was accurate, provide the applicant with another copy of their background report, the adverse action letter (also attached), and as mentioned previously, additional copies of the “summary of your rights under the FCRA” hand out.

This completes the adverse action process.

For more information on the adverse action process and other crucial sections of the FCRA, Click here to view our latest webinar titled “Getting Back to Basics”