What is the Fair Credit Reporting Act (FCRA)?

This article will help you:

• Understand what the Fair Credit Reporting Act (FCRA) is and how it affects you
• Comply with your duties under the FCRA

The FCRA is a federal law that governs how companies order and consider consumer reports, (including background or credit checks).

For the purposes of employment, the FCRA applies to both full-time employees and independent contractors.

Enforcement of the FCRA is overseen by the Federal Trade Commission (FTC) as well as the Consumer Financial Protection Bureau (CFPB). The law was enacted to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies like Checkr. To that end, it provides safeguards and rights for the consumer (the subject of the background report).

The Consumer Reporting Agency (CRA) providing the consumer report and the company that ordered the report (the End User) must adhere to certain safeguards.

While the FCRA affords rights to the consumer, it places responsibilities on the End Users of consumer reports. As the End User of the information, you have the following responsibilities under the FCRA when you run background checks:

1. Obtain consumer reports for permissible purposes under the FCRA (e.g. employment, which includes independent contracting, insurance, etc.) and don’t misuse the information
2. Notify the consumer that you will be obtaining a consumer report
3. Notify the consumer when an adverse action is taken on the basis of such reports
4. Identify the CRA that provided the report, so that the accuracy and completeness of the report may be verified or contested by the consumer

When you use background reports specifically for employment purposes (such as screening, hiring, or promoting job applicants, employees, or independent contractors), you have additional legal requirements:

1. Provide written notice that you intend to use the consumer report for employment purposes
2. Get the consumer's written permission
3. Give the consumer a copy of his or her report if the you decide not to move forward with them (or if you make any sort of adverse employment decision)
4. Give the consumer an opportunity to dispute the information contained within his or her consumer report before making a final adverse decision

As your partner in background check screening, Checkr helps facilitate your compliance with the  FCRA in a few ways:

• Obtain the consumer’s written permission: If you are utilizing Checkr’s hosted-flow process, Checkr will provide the candidate their summary of rights, disclosure notice, and certain state-specific disclosures as part of the authorization process. Checkr hosts these forms and, with your approval,they are incorporated into the consumer’s background check process. See our disclosure and authorization article for more information.
• Assist with the adverse action process:  You can use Checkr’s dashboard to help with your adverse action process. Specifically, Checkr can send pre-adverse action notices (as required for employment screening) will automatically follow up with the required post-adverse notice after a waiting period. See our adverse action article for more information.

Following these procedures ensures that candidates are aware of their rights under the FCRA and are given the opportunity to address concerns about their background check.

Checkr's guidance should not be construed as legal advice, guidance, or counsel. Companies should consult their own legal counsel about their compliance responsibilities under the FCRA, Title VII, and applicable state laws. Checkr expressly disclaims any warranties or responsibility or damages associated with or arising out of information provided.