Background Checks and the Fair Credit Reporting Act

Conducting background checks on potential new hires is a tedious yet crucial part of any successful organization. Whether you are subject to restrictions on hiring people with criminal backgrounds, need to protect sensitive information, or even seek to protect your brand identity, a background check can help make the hiring decision clearer and easier. The Federal Trade Commission considers background checks “consumer reports”. As such these remain a heavily regulated practice under the Fair Credit Reporting Act. Before you find yourself in hot water there are a few critical rules and requirements you need to know.

Potential Liabilities in Background Questions and Applications

It’s best to break down the areas of concern along with the parts of the hiring process.

When interviewing potential candidates or existing employees:

• Notify the person of your intent to perform a background check that is conditional to employment. The notice must be separate from your application documents.
• You must have the person’s written permission before obtaining the report.

If you decide to take adverse action, but before you do:

• You must provide notice to the person and a copy of the report you used to reach your decision.
• Provide a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act”. This is a specific publication from the FTC that must include any notice of adverse action.
• The person must then review the report and dispute any errors it may contain.

Finally, if no dispute arises, and you move forward with an adverse action based on your findings:

• Provide the contact information for the agency with whom you were provided the report you used to make your decision.
• Notify the person that the aforementioned company did not make the decision, and cannot give any information as to why the decision was made.
• Again provide notice of the rights to dispute the information in the report, and that they may receive an additional free report themselves within 60 days of your adverse decision.

Other Important Considerations for Employers Under the Fair Credit Reporting Act

It should also be noted that you must properly store, and securely dispose of the information contained in the person’s report. Furthermore, you must not discriminate in any decisions reached regarding the report. Finally, this article encompasses only the rules and requirements set forth by the FTC; you must also comply with any state and local laws that apply to consumer reports.

At TruDiligence, we specialize in FCRA compliant employment screening, and we can help you by providing fast, accurate, and comprehensive background checks. We work directly with HR, Risk Management, Property Management, and Compliance professionals in all industries. Get your hiring process on the right track and contact us today!