Are you complying with the Fair Credit Reporting Act?

29 Apr

As an employer, you must comply with the Fair Credit Reporting Act (“FCRA”) if you hire an outside third party, known as a “consumer reporting agency” to perform credit and background checks on employees and applicants.  The information provided by a consumer reporting agency to an employer is referred to as a “consumer report” and such report can contain anything from information on an employee or applicant’s creditworthiness and reputation to information regarding their criminal history.  While the FCRA contains many requirements related to consumer reports with which employers must comply, three basic notices employers are required to provide are:

1.            Notice prior to obtaining a consumer report.

After obtaining written permission from an applicant or employee to obtain their consumer report, you must provide them with written notice that you might use information in their consumer report for decisions related to their employment – such as hiring, retention, promotion, reassignment, etc.  This notice must be in its own document and cannot be contained within an employment application.

2.            Notice prior to taking adverse action.

Before you reject a job application, reassign or terminate an employee, deny a promotion, or take any other adverse employment action based on information contained in a consumer report, you must give the applicant or employee a notice that includes a copy of the consumer report you relied on to make your decision and a copy of the FCRA document “A Summary of Your Rights Under the Fair Credit Reporting Act.”

3.            Notice after taking adverse action.

If you take adverse action based on any information contained in a consumer report, you must notify the applicant or employee of that fact.  This notice is called an “adverse action notice” and the FCRA sets forth specifics as to when and how the notice must be sent, in addition to what information the notice must include.

The FCRA is complex and contains potentially significant consequences for non-compliance.  As an employer, you should review your processes and procedures to verify that you are not only sending out the appropriate FCRA notices but that you are in full compliance with all applicable provisions of the act.

Heather Maldegen-Long


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