Fair Credit Reporting Act Compliance Errors Can Have Huge Costs

Evaluating an applicant’s suitability for employment involves reviewing several different dimensions of their character. One of those dimensions is reviewing their credit. Poor credit may indicate poor decision-making in the applicant’s history. Further, it may also be a source of on-the-job stress as the applicant attempts to navigate it. Some fields like law enforcement place special focus on credit history. Indeed, many consider paying debts as agreed upon as a sign of integrity. Here are Fair Credit Reporting Act compliance errors that can have huge costs.

Fair Credit Reporting Act Compliance

From an employment standpoint, the FCRA places the onus on you to:

• Obtain a stand-alone disclosure and authorization form written in an unambiguous language from the applicant. Thus, informing them that their potential employer will review their credit history
• Have the report remain limited in scope to seven years or ten years in the case of bankruptcy
• Inform the applicant if you use the report against them in making a hiring decision
• Allow the applicant to review the received report upon demand
• Lastly, allow the applicant to dispute the information in the report.

The risk involved in the process can feel like a daunting task, as failure to comply with the Fair Credit Reporting Act (FCRA) while conducting a background check can open you up to legal action, and the price tag can be quite high. In 2021, an applicant received a settlement of nearly $175,000 after a potential employer violated the disclosure requirement and the applicant did not fully understand that the employer would be requesting a consumer credit report. Compounding this Fair Credit Reporting Act compliance errors was the fact that the company used a form that included a liability waiver along with the credit disclosure, an action that was found to be in violation.

Learn More About Fair Credit Reporting Act Compliance Errors

This demonstrates how an infraction that may appear innocent could potentially lead to a huge settlement. It also demonstrates why it is important to have professionals in your corner that understand all potential angles that compliance can bring. TruDiligence is aware of the importance of compliance with the Fair Credit Reporting Act. We are, indeed, committed to providing thorough, compliant, and complete background checks and investigative services.