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FCRA Compliance

By: Vanessa Mitchell Tuesday, 11 August 2020

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What is FCRA?

The FCRA (Fair Credit Report Act) is a federal law regulating the collection and reporting of an individual’s background information. A CRA (consumer reporting agency) and employer both have obligations under the FCRA. It also protects the consumer with provisions like: consent must be obtained, the consumer has a right to receive their report, the consumer has a right to dispute information, etc. For more information reference the FCRA here.

 

FCRA Employer Obligations

  1. Consent Form

Under the FCRA, employers must get permission to run a background check from the subject of the report before initiating the request. This is accomplished through obtaining a signed Consent Form, also referred to as an Authorization and Disclosure Form.

The FCRA requires the Consent Form be a stand alone document that contains specific language. It also prohibits erroneous information, which the courts have concluded applies to state/local required disclosures. Eliminating state-specific disclosures makes the Consent Form FCRA compliant, but also renders it non-compliant according to state requirements. As such, employers must be aware of and communicate additional disclosures as required.

 

  1. Adverse Action

If you make a decision that negatively impacts the subject of the background report, based all or in part on the results of the report, you must follow the adverse action process. According to the FCRA, this includes: Pre-Adverse Action, Waiting Period, Post-Adverse Action.

 

  1. Copy of Report

    The FCRA ensures the right of a consumer to see a copy of their report when requested; there is no lawful cause to refuse the request. 

The FCRA uses this provision to encourage transparency. In doing so, it allows the consumer to identify and dispute inaccuracies – regardless of whether these influenced your decision.

 

  1. Dispute

Any information that is identified as inaccurate can be disputed with the agency running the background check. Similar to providing a copy of the report, there is no lawful cause to deny the subject of the report their right to dispute.

When a dispute is submitted, Choice Screening will verify the information being disputed with the original source. Upon conclusion, you and the applicant or employee will be notified that either the original report was confirmed or that it was updated according to our researcher’s findings. 

 

  1. Security & Privacy

The FCRA obliges users and providers of background reports to ensure adequate security so that personal information about the consumer cannot fall into the wrong hands.

Some of these responsibilities include:

  • Ensure only those authorized to see a consumer report gain access.
  • Store reports in a secure location whether digital, hard copy or otherwise.
  • Dispose of consumer reports in a manner that cannot be read or reconstructed – whether digital or hard copy.

Tactics employed by business include avoiding shared login credentials and using strong passphrases (rather than passwords). Ensuring hard copies are locked and are never left sitting out protects privacy. Using a shredder service or high security shredder will securely dispose of old documents as well as clearing hard drives before getting rid of an old computer.

 

Why FCRA Compliance Is Important

An employer’s obligations under the FCRA carry many responsibilities from which a business may suffer financial and reputational loss if ignored.

According to SHRM, FCRA lawsuits have been on the rise over the last decade. With yearly increases in litigation by 8.7%. Penalties for FCRA non-compliance can easily exceed tens of thousands and willful non-compliance leaves employers vulnerable to punitive damages. This only considers enforcement by the FTC and CFPB, other agencies like EEOC or local government can also be involved.

In order to protect your company, its’ reputation and to avoid potential litigation you must comply to FCRA regulations.

 

 Other Employer Obligations

  1. Ban the Box is an employment law which many states and jurisdictions have been adopting over recent years. Ban the Box varies by state and dictates at what point in the hiring process, inquiries on an applicant’s criminal background can be made. This can include prohibiting the “box” on a job application which asks whether the applicant has been convicted of a crime, or not using criminal conviction history of a potential applicant until a conditional offer of employment has been presented to the applicant.
  2. Salary History Ban: prohibits employers from asking prospective employees for salary history information. Salary history information can include both benefits and/or compensation.

 

There are other employment laws you should review in addition to the FCRA, such as Title VII or Marijuana Testing. It is likely you have additional obligations beyond the discussion found in this article. Ensure you are consulting with a qualified employment attorney prior to performing background screening.

Do you still have questions about FCRA compliance? 

Topics: Compliance, Best Practices, FCRA

Vanessa Mitchell

Vanessa Mitchell

Passionate blogger dedicated to making your life easier when it comes to background screening.