The Importance of Complying with the Fair Credit Reporting Act (FCRA)

An employer must certify in writing to the Consumer Reporting Agency (CRA) that the employee has been given the required notices and has received written authorization from the employee to obtain the background report. The employer must also certify they are requesting and receiving the information solely for the purposes in making an employment decision.

The CRA must obtain prior written consent from the applicant and in cases, if an investigative consumer report is requested, the disclosure must contain specific language regarding the subject’s personal characteristics, mode of living, and job performance.

The disclosure must communicate to the applicant they have a right to receive a copy of their background report in its entirety in state specific areas, regardless of whether any adverse action is taken. Along with the signed disclosure and Notice of Background Investigation, A Summary of Your Rights Under the FCRA, any state specific releases, and compliance forms must also be provided at that time. It is important to note, the disclosure and releases must be “stand alone” documents, and may not be a part of or attached to their employment application.

If an employer decides not to hire or promote the applicant or employee based on the information contained in the background report, certain steps must be taken:

  1. Provide the applicant/employee with a pre-adverse action letter, which states that they have five business days to dispute any negative information contained in their report. This letter must also disclose the name of the CRA who procured the background report. Along with this letter, they must also receive a copy of their background report, A Summary of Your Rights Under the Fair Credit Reporting Act form, as well as any additional state specific compliance forms.
  2. After the five business days pass, the applicant/employee must be provided with an adverse action letter. This letter “closes the door,” letting the applicant know they are no longer being considered for employment. This letter must also disclose the name of the CRA who procured the background report. Along with this letter, they must also receive a copy of their background report, A Summary of Your Rights Under the Fair Credit Reporting Act form, as well as any additional state specific compliance forms.

Learn more about the federal government privacy requirements of the Fair Credit Reporting Act (FCRA) with the FCRA document.

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