Like many other processes, background screening is governed by specific legislation designed to protect consumer information and ensure fair treatment. At the forefront of this legislative landscape is the Fair Credit Reporting Act (FCRA), a federal law enacted to promote the accuracy, fairness, and privacy of consumer information contained within the files of consumer reporting agencies.
What is the Fair Credit Reporting Act (FCRA)?
Originally passed in 1970, the Fair Credit Reporting Act (FCRA) was established to regulate the collection, dissemination, and use of consumer information, including credit information, personal character, general reputation, and lifestyle.
The FCR was and has been amended multiple times, most notably by the Fair and Accurate Credit Transactions Act (FACTA) in 2003.
Under FCRA, a “consumer report” is broadly defined and can include credit reports, criminal background checks, rental history, and more—essentially any report provided by a consumer reporting agency that can be used for eligibility decisions regarding employment, credit, insurance, or housing.
FCRA Compliance in Background Screening
For employers, compliance with FCRA is crucial when using third-party services to conduct background checks on job applicants or existing employees. The act sets out clear steps an employer must take, including:
- Disclosure and Authorization: Before conducting a background check, employers must disclose their intention to the applicant or employee in a document that consists solely of the disclosure. They must also obtain written permission from the individual to carry out the check.
- Pre-Adverse Action Notification: If an employer considers taking adverse action (like denying employment) based on the findings of a consumer report, they must provide the individual with a pre-adverse action notice, a copy of the consumer report, and a copy of ‘A Summary of Your Rights Under the Fair Credit Reporting Act’—a document which explains their rights under the FCRA.
- Adverse Action Procedures: Should an employer decide to proceed with adverse action, they must then provide the individual with an adverse action notice. This notice must include the name, address, and phone number of the consumer reporting agency that supplied the report; a statement that the agency did not make the adverse decision and cannot explain why it was made; a notice of the individual’s right to dispute the accuracy or completeness of any information the agency furnished; and a notice of their right to obtain an additional free report from the agency upon request within 60 days.
Non-compliance with FCRA guidelines can lead to legal consequences for employers, including statutory fines, punitive damages, and legal fees. Therefore, strict adherence to all FCRA requirements is essential during the background screening process.
Impact on Individuals
For consumers and employees, the FCRA provides a level of protection and control over their personal information.
Through its stipulations, individuals have the right to know what is in their file, to dispute incomplete or inaccurate information, and to seek damages from violators.
Moreover, it gives them the assurance that their information will only be used for permissible purposes and that they will be treated fairly and with respect to their privacy during background screening processes.
Wrapping It Up
The Fair Credit Reporting Act plays a pivotal role in balancing the needs of businesses to conduct thorough background screenings with the rights of individuals to have their information handled justly and confidentially.
For employers, FCRA compliance should be considered a foundational element of their hiring practices, while individuals should be aware of their rights under the act to protect their personal information. Understanding and adhering to the FCRA and all other applicable legislation both at federal an local level helps maintain a transparent, fair, and respectful environment for both parties involved in the employment screening process.
Plexus Global: Hire Safely With Knowledge
Plexus Global is a California-based background screening company serving organizations all over the U.S. and abroad.