FCRA Compliance

The Fair Credit Reporting Act (FCRA) governs how employers can execute and use pre-employment background checks. Background check compliance is a critical component of any screening policy. Here’s what you need to know about FCRA compliance:

Table of Contents

Background on the FCRA

The FCRA was passed in 1971 in order to protect consumers’ privacy and to ensure fairness and impartiality from consumer screening agencies. Keep in mind this law was enacted 50 years ago before the internet, google, or social media. The original goal was to regulate how businesses could access and use private information, specifically when it came to credit information. Retail credit was booming, and consumers were alarmed at how easily organizations were able to get personal credit information and use it to deny loans, housing, or other opportunities. In addition, many credit reporting agencies, in an effort the shed light on an individual’s character, expanded the information they provided to include other private info such as marital status, religious affiliation, or disabilities. Individuals were unable to resolve errors, provide explanations, or limit how their private information was used. 

The FCRA was enacted to curb these abuses and protect consumers by limiting the types of information consumer reporting agencies can collect and how that info can be used. It has since been amended and revised to include not only the major credit bureaus but background screening agencies as well. 

FCRA Compliance for Employers 

Any employer using a consumer reporting agency for pre-employment screening purposes must comply with the FCRA. FCRA regulations apply for part-time and full-time employees, vendors, contractors, temps, and volunteers. All these folks have rights pertaining to protecting their personal information, including the following:

Disclosure and Consent

The FCRA gives individuals the right to consent to a background check. Compliant employers disclose in writing their intent to run a background check and receive written authorization from the individual to run the check before proceeding.

Pre-Adverse Action

The FCRA gives individuals the right to know if the information disclosed in a background check will affect their opportunities prior to any adverse actions being taken. Employers must disclose their intent to take adverse action and give the individual time to address and respond to concerns. They must also provide candidates with a summary of their rights under the FCRA.

Adverse Action

The FCRA outlines specific actions employers must take once an adverse action decision has been made. These actions include the following:

  • Notifying the individual of the decision
  • Providing them with information about the background check company 
  • Informing them of their rights to request a free copy of their report 
  • Telling the candidate they can dispute the information with the screening company

The Bottom Line

Background checks are an important part of safe hiring practices. FCRA compliance helps companies get the info they need to make smart hiring decisions in a fair and transparent manner.