Fair Credit Reporting Act is definitely not child’s play
a consumer’s [applicant’s/employee’s] credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for—credit or insurance to be used primarily for personal, family, or household purposes; employment purposes….
Disclosure and consent. First, an employer must get an applicant’s/employee’s consent to obtain consumer report information in the proper manner.
- An employer must make a “clear and conspicuous” written disclosure to the applicant/employee that it will obtain a consumer report.
- The disclosure document must consist “solely” of the disclosure that a consumer report may be obtained. This means that other information cannot be included on the disclosure/consent form.
- The applicant/employee must provide written permission for the employer to obtain a consumer report.
Adverse action based on report. The next FCRA provision that trips up many employers is how to handle consumer reports that contain negative information. Again, the FCRA establishes a specific process.
- Under the FCRA, if an employer intends to take “adverse action” against an applicant/employee based in whole or in part on the information in the report, the employer must provide a pre-adverse action notice to the applicant/employee.
- The pre-adverse action notice must include a copy of the background report(s) and a statement of rights prepared by the Federal Trade Commission (FTC) along with notice that adverse action will be taken after the applicant/employee has a reasonable opportunity to provide information that disputes the contents of the consumer report.
- Then, if the employer decides to proceed with the adverse action, it must provide an applicant/employee with an adverse action notice that meets certain FCRA specified requirements.
- Review hard-copy and online applications to ensure that the disclosure and consent provisions meet the FCRA stand-alone requirements.
- Review disclosure and consent documents provided by third party vendors as well.
- If adverse employment action is based on information in a consumer report:
- Provide notice of potential adverse action based on a consumer report.
- Provide notice of the actual adverse action with required information.
- Use checklists and template documents to assist the company in complying with the technical FCRA requirements.
- Ensure that the company is complying with any state credit reporting requirements in addition to the federal FCRA requirements.
- It’s complicated, so seek assistance to ensure that your background check process is FCRA-compliant.