As most readers know, employers are permitted to use consumer reports when screening employment applicants and when evaluating employees for promotion, reassignment, or retention purposes—as long as they comply with the Fair Credit Reporting Act (FCRA). FCRA (Public Law No. 91-508) Sections 604, 606, and 615 which spell out their responsibilities and the methods for using consumer reports for employment purposes.

The FCRA, which became law in 1970, was intended to ensure that the information supplied by consumer reporting agencies (then called credit reporting agencies or sometimes, bureaus) was accurate and consumers were afforded recourse when they thought it was not. Amendments to the FCRA—which became effective September 30, 1997—significantly changed the relationship between the user (the employer) and the consumer reporting agency (CRA). It also clarified a number of ambiguities contained in the statute while increasing the legal obligations of users who procured consumer reports. The FCRA was again significantly amended in 2003. That revision, commonly called the FACT Act, clarified additional ambiguities and lessened some of the burdens placed on users in prior amendments. The following revisits some of the more substantial aspects of the FCRA and sheds light on some of the obligations of both users and CRAs.If your company gets background information on prospective employees, it’s likely you’re covered by the Fair Credit Reporting Act. Before you get a background screening report, the law requires that you make certain disclosures and get a prospective employee’s authorization. Is it time for a FCRA compliance check?

Background screening reports are categorized as “consumer reports” under the FCRA when they serve as a factor in determining a person’s eligibility for employment, housing, credit, insurance, or other purposes and they include information “bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.”

Clearly, before you request a consumer report regarding a prospective employee, disclose to the applicant that you intend to obtain a report and get their written authorization allowing you to do so.

If the resultant consumer report reveals something that may cause the user to decide not to hire the applicant, the user must notify the individual of the results of the report and provide a copy of the report to that individual. Next, the employer must give the applicant sufficient time to review the report so they can challenge any elements that they claim are inaccurate or incorrect.

If the organization ultimately decides not to hire someone based in whole or in part on the contents of the report, it must provide a notice to that person that states they weren’t hired in part because of something revealed in the report.

Organizations often ask how to make the required initial disclosure before it obtains the background report and get the prospective employee’s authorization. It’s easier than most might imagine. Under the FCRA, the employer must provide the prospective employee with a clear and conspicuous written disclosure that it plans to obtain a consumer report about them and must obtain written permission to compile the report. It is permissible to put the required disclosure and request for authorization in one document. However, be sure to use clear wording that the prospective employee will understand.

Here are few tips:

  • Don’t include language that claims to release the organization from liability for conducting, obtaining, or using the report.
  • Delete any wording that purports to require the applicant to acknowledge that hiring decisions are based on legitimate non-discriminatory reasons.
  • Get rid of overly broad authorizations that permit the release of information that the FCRA doesn’t allow – for example, bankruptcies.
  • Don’t include anything else that makes it harder for the applicant to understand the main purpose of the document, and
  • Eliminate any additional waivers, authorizations, or disclosures that might be better suited to include in a separate document.

Complying with the FCRA’s disclosure requirements is easy. It can be accomplished in a few sentences. Just include a simple, easy-to-understand notification that indicates that the organization intends to obtain a consumer report. The simpler and clearer the better, and remember, it’s the law.