HR Support on FCRA Procedures

Editor's Note: The Fair Credit Reporting Act places requirements on employers before conducting background checks.

David B. WeisenfeldOverview: The Fair Credit Reporting Act (FCRA) governs the use of consumer credit reports as well as investigative consumer reports for employment purposes. To conduct these third-party employee background checks of job applicants or employees, companies must comply with a number of steps under the FCRA. Chief among the steps are the Act's notice and consent requirements.

The FCRA mandates not only that employers notify all job applicants and employees beforehand if they wish to conduct a background check, but that employers obtain their written consent.

In addition, employers that decide they might deny employment or take other adverse action based in whole or in part on the findings of a background check first must send a pre-adverse action letter to the applicant or employee. This notification also must provide a copy of the report, a summary of FCRA rights and information on how individuals can challenge the report if they wish to do so.

HR professionals should be aware that several states have counterparts to the FCRA. Many mirror the federal legislation, but some impose additional requirements.

Trends: A number of states, including California, Illinois and Connecticut, have enacted laws in the last few years limiting the use of credit checks to certain types of jobs such as those involving financial data or sensitive information. A host of similar measures have been introduced elsewhere, so this is a trend that bears watching.

Author: David B. Weisenfeld, JD, Legal Editor

New and Updated

  • Preemployment Screening and Testing: New York

    Type:
    Employment Law Manual

    Updated to reflect final regulations to the New York City Fair Chance Act, effective August 5, 2017.

  • Fair Credit Reporting Act Summary of Rights Form

    Type:
    Policies and Documents

    Under the Fair Credit Reporting Act, an employer must provide an applicant or employee with a summary of rights before taking an adverse action based on a consumer credit report obtained from a consumer reporting agency or within three days of requesting an investigative consumer report.

  • Credit Check Limitations by State

    Type:
    Quick Reference

    Updated to reflect District of Columbia law restricting credit checks.

  • Supreme Court Raises Bar for Fair Credit Reporting Act Claimants

    Date:
    May 26, 2016
    Type:
    News

    The Supreme Court has ruled in Spokeo v. Robins that a plaintiff must allege something more than a hypothetical violation in order to pursue a federal claim under the Fair Credit Reporting Act (FCRA).

  • Background Checks

    Date:
    July 29, 2014
    Type:
    Editor's Choice

    An employer's use of background checks raises many compliance issues, including the Fair Credit Reporting Act; the state "ban the box" trend that prevent employers from asking criminal history questions on initial job applications; and ensuring background checks do not discriminate against minority job applicants.

  • Webinar: Key Trends in Pre-employment Screening and Testing

    Date:
    September 12, 2013
    Type:
    Podcasts and Webinars

    From the use of criminal background checks for employment purposes to ban the box laws and credit checks, this webinar covers key dos and don'ts plus the state of the law.

  • How to Conduct a Credit Check for Employment Purposes

    Type:
    How To

    This How To outlines the steps an employer should take in with determining whether to run a credit check during the preemployment process and how to do so.

  • Background Check Policy

    Type:
    Policies and Documents

    An employer may use this policy to notify job applicants and employees of its intent to perform a background check. An employer may not conduct a background check without written authorization from job applicants or employees.

  • How to Use Criminal Records for Employment Purposes

    Type:
    How To

    This How To outlines the steps that an employer should take when using criminal records for employment purposes.

  • Type:
    Legal Timetable