Pre-Adverse Action

You’ve decided not to hire an applicant based on the results of their background check, now what? According to the Fair Credit Reporting Act, you must follow the proper steps to notify the candidate of your decision.

Adverse action as defined in Section 603(k)(B)(ii) of the Fair Credit Reporting Act (FCRA) means a denial of employment, or any other decision for employment purposes, that adversely affects any current or prospective employee.

When an employer receives a background verification report, also know as a Consumer Report, and decides not to hire the applicant based on the information contained in that report, they must provide a notice to the applicant prior to taking the adverse action. The employer must also provide a separate second notice as required by the FCRA (Sections 604 & 615(a)). These notices are generally known as a pre-adverse action and adverse action letters.

In the first step, employers must provide the applicant with a pre-adverse action letter. This letter states that a decision is currently pending concerning their application for employment and needs to include the following:

• A copy of the Consumer Report and,
• The Federal Trade Commission document “A Summary of Your Rights Under the Fair Credit Reporting Act.“

The purpose of this letter is to give the applicant an opportunity to review the Consumer Report. If the report is inaccurate or incomplete, the applicant then has the opportunity to contact the employment background screening company, known as the Consumer Reporting Agency (CRA), to dispute the information contained in the report. Due to the manner in which public records are maintained, errors are possible, and cases of mistaken identification do occur. The pre-adverse action letter minimizes the possibility of an applicant being denied employment without ever knowing he or she was the victim of inaccurate or incomplete data.

In Step 2, here’s how long you should give the applicant to dispute the information found in their background check.

This is just one of the steps in a compliant employment background check. Here are the 4 steps employers need to follow to stay in compliance with the FCRA.