FCRA Employment Guidelines

The Fair Credit Reporting Act (FCRA) was created to have the consumer's welfare in mind and keep processes legal and fair. Compliance with the FCRA is required by law. Businesses and organizations not complying with the FCRA are increasing their liability and more importantly, not protecting consumer's rights.

As an employer, you may use consumer reports when you hire new employees and when you evaluate employees for promotion, reassignment, and retention — as long as you comply with the FCRA. The FCRA (including Sections 604, 606, and 615) outlines your responsibilities when using consumer reports for employment purposes.

A consumer report contains information about an individual's personal and credit characteristics, character, general reputation, and lifestyle. The FCRA covers a report if a consumer reporting agency (CRA) — a business that assembles such reports for other businesses — prepares the report.

Employers often do background checks on applicants and get consumer reports during their employment. Some employers want only an applicant's or employee's credit-payment records; others want driving records and criminal histories. It's important to note that if the record is used in an employment decision, regardless of its type, it is considered a consumer report and the provisions below apply. 

Written notice and authorization

Before you can order a consumer report for employment purposes, you must notify the individual in writing — in a document consisting solely of this notice — that you are obtaining the report . Additional pieces of information that you may want to include in this notice are:

1. The type(s) of reports being accessed
2. That written authorization is required to procure a consumer report
3. That the consumer has the right, upon receipt of a written request, to receive a complete and accurate disclosure of the nature and scope of the investigation
4. That the consumer is entitled to a copy of their rights

Separately, you must also get the person's written authorization before you ask a CRA for the report. (Special procedures apply to the trucking industry).

Adverse action procedures

If you rely on a consumer report for an "adverse action" — denying a job application, reassigning or terminating an employee, or denying a promotion — be aware that:

Step 1: Before you take the adverse action, you must give the individual a pre-adverse action disclosure that includes a copy of the individual's consumer report and a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act" — a document prescribed by the Federal Trade Commission. The CRA that furnishes the individual's report will give you the summary of consumer rights.

Step 2: After you've taken an adverse action, you must give the individual notice — orally, in writing, or electronically - that you have taken the adverse action. The notice must include:

• the name, address, and phone number of the CRA that supplied the report
• a statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give specific reasons for it
• a notice of the individual's right to dispute the accuracy or completeness of any information the agency furnished and his or her right to an additional free consumer report from the agency upon request within 60 days

Certifications to consumer reporting agencies

Before giving you an individual's consumer report, the CRA will require you to certify that you are in compliance with the FCRA and that you will not misuse any information in the report in violation of federal or state equal employment opportunity laws or regulations.

What's your responsibility?

In any case where information in a consumer report is a factor in an adverse decision— even if the report information is not a major consideration — you must follow the procedures mandated by the FCRA. In this case, you must provide the applicant a pre-adverse action disclosure before you reject his or her application. When you formally reject the applicant, you must provide an adverse action notice. The applicant has the right to receive a copy of their background check from their background screening provider.