Complying with the FCRA: Don't be scared, be prepared!

Complying with the FCRA: Don't be scared, be prepared!

You have met the candidate you think is the perfect fit for your company. The only thing left to do is… THE BACKGROUND CHECK! (Cue ominous music).

Why does requesting background checks, a necessary part of the employment process, strike fear into the hearts of many employers? Because of the current popularity of Fair Credit Reporting Act (“FCRA”) class action lawsuits, where federal courts appear to favor the plaintiff, and lucrative “statutory damages” are awarded.

How can you, as an employer, limit your liability?

Prior to requesting a consumer report, be prepared to answer these questions:

Are you providing disclosures and getting written authorizations?

Are you providing disclosures and obtaining written authorizations that comply with the FCRA?[1] The FCRA requires that, for employment purposes, a clear and conspicuous disclosure be made to the consumer prior to requesting the report, which may include a brief description of the nature of the consumer reports.[2] At the end of the day, the disclosure must stand alone from the employment application[3] or any other extraneous information[4], with the exception of the authorization[5] statement. While the authorization statement does not HAVE to be part of the disclosure statement, the FCRA does require written authorization from the consumer be obtained prior to a report being requested.[6]

How will you address unfavorable information?

What are your plans if the report reveals any information on the candidate that could adversely affect your decision? Before making any decision that could be considered unfavorable based on any part of a background report, the FCRA requires an employer[7]:

  • provide the candidate with a pre-Adverse Action notice, including a summary of the consumer’s rights and a copy of the report
  • allow the candidate reasonable amount
  • of time to review and dispute inaccurate information
  • provide an Adverse Action notice if the adverse decision is made.

Have you reviewed your background check processes?

When was the last time you reviewed and refreshed your background check processes? Review and update processes regularly, and be aware of state and local laws in addition to federal laws such as "Ban the Box.”

Be proactive, and consider having a third-party (such as competent legal counsel) review your disclosures and authorizations, as well as other processes such as the pre-Adverse Action and Adverse Action processes required by the FCRA. Answering these questions can assist companies in reducing their risk of exposure to FCRA class action lawsuits[8].

Employers should be sure that they can support any reason a decision was made in line with the facts at hand and compliance with the laws that apply. iiX offers employers a variety of employment background reports and resources, including Adverse Action Notification services. For more information on the various iiX criminal background search options available to employers, please click here, or contact our sales team at 800-683-8553, Option 2.

[1] Using Consumer Reports: What Employers Need to Know (January 2012)

[2] FTC Advisory Opinion to Hawkey (12-18-97)

[3] FTC Advisory Opinion to Leathers (09-09-98)

[4] FTC Advisory Opinion to Hauxwell (06-12-98)

[5] FTC Advisory Opinion to Beaudette (06-09-98)

[6] FTC Advisory Opinion to Steer (10-21-97)

[7] 40 Years of Experience with the Fair Credit Report Act: An FTC Staff Report with Summary of Interpretation. (July 2011)

[8] “The Swelling Tide of Fair Credit Reporting Act (FCRA) Class Action: Practical Risk-Mitigating Measures for Employees” The Littler Report (August 2014)

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Sarah S. Foster is compliance supervisor of the Verisk Analytics iiX unit, a premier provider of motor vehicle reports (MVRs) and preemployment screening services. She is NAPBS FCRA-certified and holds CIPP/US and CIPM certifications from the IAPP. Her focus is on compliance with the FCRA and DPPA in utilizing consumer reports and background checks. Sarah has a bachelor of science degree from Tarleton State University.