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What is the Fair Credit Reporting Act (FCRA)?

James
  • Updated

 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.

Your Responsibilities as an End-User

As the End User of the information, you have the following responsibilities under the FCRA when you run background checks for any purpose, including employment or tenant screening:

  1. Permissible Purpose: 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. Disclosure: Notify the consumer that you will be obtaining a consumer report
  3. Adverse Action Notice: Notify the consumer when an adverse action is taken on the basis of such reports
  4. CRA: 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 increased legal requirements:

  1. Permissible Purpose: 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. Written Disclosure: Provide written notice to the consumer that you intend to use the report for employment purposes
  3. Written Authorization: Get the consumer's written permission to run a report
  4. Pre-Adverse Action: Provide the consumer a pre-adverse action notice, a summary of rights, and a copy of their report if you intend to make an adverse decision (such as declining them for employment or promotions) based on the information in the report
  5. Waiting Period: Give the consumer a reasonable waiting period to dispute the information contained within his or her consumer report before making a final adverse decision
  6. Adverse Action Notice: Notify the consumer when an adverse action is taken
  7. CRA: Identify the CRA that provided the report, so that the accuracy and completeness of the report may be verified or contested by the consumer

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

  • 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.
  • Adverse Actions:  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.

That said, Checkr is ultimately assisting you with your duties -- under the law, you are still responsible for making sure that you meet your responsibilities.

Checkr's Responsibilities as a CRA

As a consumer reporting agency (CRA), Checkr has different responsibilities under the FCRA, including:

  • Credentialing end-users to run background checks and ensuring that they have permissible purpose
  • Maintaining strict procedures to ensure maximum possible accuracy of information in reports, or sending a contemporaneous notice to consumers when we report potentially adverse information
  • Providing consumers with information in their files upon request (also known as File Disclosure)
  • Re-investigating inaccuracies and disputes within 30 days
  • Not reporting obsolete information, such as non-convictions older than seven years

Note that these are different from your responsibilities as an end-user. For example, while CRAs are restricted on what can or cannot be reported in a background check (such as inaccurate or obsolete information), end-users are responsible for how the information is reviewed and what actions they can take.

Following the above 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.



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