FCRA Compliance Steps

Step 1: Employer Certification

If you work with a Consumer Reporting Agency (CRA), such as Clarifacts, to conduct background checks, you are required to certify the “permissible purpose” about why you are obtaining the consumer report. You must also certify that you will:

• Not use any of the information found in the Consumer Report in violation of any federal or state equal opportunity laws
• Get all of the needed disclosure and authorization forms as required by the Fair Credit Reporting Act (FCRA)
• Give the appropriate pre-adverse and adverse action notices to the applicant if you don’t plan to hire him or her based on the results of the background check
• Give the additional information required by law if an Investigative Consumer Report is needed. (A reference interview is an example of an Investigative Consumer Report where the CRA obtains detailed information on the applicant’s job performance.)

Step 2: Disclosure and Authorization

Once you have given the CRA employer certification, you are required to disclose to the applicant that you may be obtaining a Consumer Report on them. This notice to the applicant is known as the disclosure form.

In addition to the disclosure form, the applicant must receive, and sign, the authorization form which permits the employer to run the background check.

The disclosure and authorization forms must be stand-alone documents that are separate from the application.

Step 3: Pre-Adverse Action

After you have received the Consumer Report back from the CRA, if you decide not to hire the applicant based of their background check results, you are required to provide the applicant with a copy of their Consumer Report, the pre-adverse action letter and “A Summary of Your Rights Under the Fair Credit Reporting Act.”

The purpose of the pre-adverse action letter is to give the applicant an opportunity to review the Consumer Report. If the report is inaccurate or incomplete, the applicant has the opportunity to contact the CRA to dispute the information contained in the report.

The pre-adverse action letter helps minimize the possibility of the applicant being denied employment, or promotion, without him or her knowing they were a victim of insufficient or erroneous information.

The FCRA does not comment on the amount of time employers should give the applicant to dispute the information, however a reasonable amount of time should be given before you make a final decision – five business days is pretty common.

The pre-adverse action process must also be followed if you re-screen a current employee and fire them, or refuse to promote them, based off of the Consumer Report results.

Step 4: Adverse Action

The final step you must take is to send the applicant the adverse action letter. The letter is required to include the name, address and phone number of the CRA, and a statement that explains the CRA had no role in the decision to not hire the applicant, and is not able to explain why the decision was made.

The letter also has to include a statement letting the applicant know they have the right to dispute any information contained in their Consumer Report, and that they can request additional free copies of the Consumer Report from the CRA within 60 days.

The letter also needs to include another copy of “A Summary of Your Rights Under the Fair Credit Reporting Act.” Under the FCRA, employers are required to notify the applicant twice, both before and after adverse action. This gives the applicant the maximum opportunity to correct any incomplete or inaccurate information in the Consumer Report that can hurt their chances at employment.

Are you ready to work with a background check company that’s committed to background screening FCRA compliance? Contact us at 800.318.0553.