FCRA Compliance During Employee Background Checks

FCRA is shown on a conceptual business photo.

Prospective employees have certain privacy rights guaranteed by the Fair Credit Reporting Act (FCRA). Failure to respect these rights can lead to expensive lawsuits and loss of goodwill among your clients.

Suppose you’re an HR professional, a hiring manager, a business owner, or a compliance professional, and your organization is considering checking prospective employees’ credit as part of your vetting process. In that case, it’s vital to understand the importance of FCRA compliance.

About Consumer Reports (Which Include Credit Scores)

The Federal Trade Commission (FTC) says that consumer reports, including credit checks, are legal for employment screening purposes AS LONG AS the employee gives their permission in writing.


  • You must notify the prospect that you will be checking their consumer reports
  • Offer this notification in a stand-alone document, not a part of the job application

And if you take adverse action — in this case, declining their application — you must provide the employee with a copy of the consumer report that influenced your decision and a copy of the FTC A Summary of Your Rights Under the Fair Credit Reporting Act.

Michaels Stores Was Sued in 2015

Michaels has faced several lawsuits combined into a class action lawsuit for this very issue. The company failed to notify potential employees that their consumer reports would be used as part of the hiring process, using a separate, distinct signature form.

Lawsuits like these can cost an employer millions of dollars in settlement funds, not to mention significant legal expenses.

Is Your Hiring Process Up to Date?

When the COVID-19 pandemic struck, many organizations stopped paying close attention to hiring processes and compliance. Businesses were forced to close, skeleton crews worked from home, and regulatory agency staff stayed home.

Those times are over. The workforce is also returning en masse. Is your employee vetting process up-to-date?

At TruDiligence, we understand the importance of FCRA compliance, and we look forward to earning your business. We aim to help organizations get the records and information they need to make an informed choice when hiring new staff. Contact us today. We look forward to earning your business.

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