19 Jan What are the FCRA Requirements for an Employer?
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When you first start researching an employee background check system, one of the first laws you’ll see mentioned is the Fair Credit Reporting Act, or FCRA. But what is this law? What does it have to do with background checks? And what are your obligations under it?
What Is The Fair Credit Reporting Act?
The Fair Credit Reporting Act is a law passed in 1970 regarding the collection, use, and distribution of consumer information from credit bureaus. It’s enforced by the Federal Trade Commission, the Consumer Financial Protection Bureau, and private litigation. In other words, it’s a law anybody handling credit information needs to abide by, or be exposed to serious legal risk.
Do I Need To Be Concerned About FCRA If I’m Not Checking Credit?
Generally, any employment check should feature at least a cursory look at the credit history of your applicants if it is allowed by your State. But even if you have no interest in running credit checks, FCRA is a useful template of standards you should apply to all background checks. This also means that if you decide to add credit checks in the future, you won’t need to change anything about your current background check system.
What Are My Obligations Under FCRA?
These can be divided into three categories: Before you run the check, before you take any adverse action based on information you might receive from the report, and after you take that adverse action.
Before you run a background check, you should inform the applicant that you’ll be doing so, in writing, on a separate sheet of paper from other application materials. You’ll also need written consent to run the check; these can be the same form. Just ensure that what you’ll be checking and why is clearly designated on the form. Finally, you’ll need to certify compliance with your background check company that you’ve completed these steps. It’s not legally required to verbally discuss the background check with your applicants, but it’s a good idea; it will allow them to ask questions and disclose any potential issues if need be. It’s also highly recommended to be familiar with specific state laws regarding background checks and how you can use them, whether you’re checking credit or not.
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Before taking an adverse action, generally refusing to hire an employee, you’re obligated to inform them of the action you’re considering, supply them a copy of the report, and also supply a copy of A Summary Of Your Rights Under The Fair Credit Reporting Act, a brochure your background check supplier should provide you. This lets them correct errors, which are rare but not unheard of. Make sure the report has the name, address and phone number of your background check agency, a statement that the agency didn’t make the decision and a notice of the applicant’s rights.
Finally, after you take adverse action, you’re required to inform the applicant of that action via oral, written, or digital communication. You’ll also need to securely destroy their report once you’re done with it; check state laws to see how long you’ll need to retain the report.
As you can see, FCRA is fairly extensive. That said, it’s in place to protect all parties; it will ensure you get the best possible check, and only hire the right employees. If you need the best background checks done with care for both you and your applicants, request a free background check trial to see how the best get it done.