Employer's Crash Course on Fair Credit Reporting Act

Employers’ Crash Course: The Fair Credit Reporting Act

Background checks are nothing new, and now essentially customary in the recruiting and hiring world. Most employers run checks on all new applicants for every open position and even those up for promotions.

So while screenings are a normal part of the hiring process, keep background check regulations in mind to protect your organization and your applicants. Designed to protect the rights and information of job applicants, the Fair Credit Reporting Act (FCRA) carries immense influence.

When followed properly, the FCRA will help you make informed hiring choices while protecting your candidates. When broken, however, the FCRA gives people the power to levy lawsuits against organizations. To protect your business, make excellent hires and avoid potential legal trouble, brush up on your knowledge with this Employer’s Crash Course on Fair Credit Reporting Act.

What is the FCRA?

The FCRA outlines the responsibilities of consumer reporting agencies and the rights of those undergoing background and credit checks. It requires consumer reporting agencies to report accurate and complete information to businesses when they evaluate employment candidates. It also allows job applicants to see their reports and dispute any inaccurate information.

Under FCRA rules, background check agencies have a duty to be thorough and accurate in their reporting. Job applicants too have the right to advocate for their reputation and true identity. The burden of the FCRA isn’t just on reporting agencies, however. Employers must uphold the rights of their applicants in order to stay FCRA compliant.

How can I be compliant?

Employers must follow certain procedures when recruiting and hiring to comply with the FCRA:

  • Inform applicants you are going to screen them, then get written consent from every applicant to begin the background check process.
  • Explain what information your background reports gather and why you need it but only if an explanation does not cause confusion.
  • Be aware of your state’s screening restrictions and adhere to them. “Ban-the-box” laws have become more common in recent years.
  • If you are going to take employment action—such as rejection or termination—due to the content of a background report, you must follow the adverse action process. This includes sending pre-adverse action and adverse action letters, a copy of their report and their FCRA Rights.
  • Understand that applicants have the right to dispute their report at any time. When you send a pre-adverse action letter, you have to allow a reasonable amount of time—typically around five days—for the individual to dispute their report.

If you follow these steps, you will stay within FCRA rules and avoid negligent hiring suits.

What are the consequences of noncompliance?

The number of lawsuits brought under the FCRA reached an all-time high in 2019 and have continually increased every year since 2011. If an employer and their consumer reporting agency fail to meet FCRA standards, they put themselves at risk for an expensive lawsuit.

Because background screening is often part of standard hiring processes, organizations can repeat the same FCRA infraction multiple times. This can lead to costly class-action lawsuits from multiple parties.

Eliminate the possibility of FCRA non-compliance suits and maintain your responsibilities by partnering with a trusted background screening agency. One Source is completely FCRA compliant and here to help you navigate its regulations easily. That was your Employer’s Crash Course on Fair Credit Reporting Act. Contact One Source Client Relations to learn more about our services.