What is the Fair Credit Reporting Act (FCRA)?
The Fair Credit Reporting Act (FCRA) is a federal law (15 U.S.C. § 1681 et seq.) that regulates the collection, dissemination, and use of consumer information, including consumer credit information. Almost any type of background check that an employer requests from Hire Level to be used in the hiring process is considered a consumer report. In addition, Hire Level is considered a Consumer Reporting Agency. Employers must follow all FCRA requirements in order to remain in compliance. This page will provide a summary of information that is helpful to employers when using consumer reports for employment purposes.
What is a “Consumer Report”?
According to the FCRA, a consumer report is “any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for…employment purposes.”
Employment purposes may include hiring, promotion, reassignment or retention.
In addition to consumer reports, there is another type of report called an investigative consumer report. An investigative consumer report “means a consumer report or portion thereof in which information on a consumer’s character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer reported on or with others with whom he is acquainted or who may have knowledge concerning any such items of information.” Examples of this type of consumer report are personal references or employment verifications that include information related to the employee’s performance, attitude, character, etc.
As you can see, the Fair Credit Reporting Act not only governs credit information, but also other consumer reports such as criminal court records, driving records, and employment verification.
Requesting Consumer Reports
Before a consumer reporting agency such as Hire Level may provide or prepare a consumer report for an employer, it must obtain certification from the employer that the employer:
- provided the required disclosure to the applicant/employee,
- received written authorization to obtain the report,
- will not use the information in violation of any applicable equal employment opportunity law or regulation, and
- will abide by the requirements stated before taking any adverse employment action.
Hire Level will obtain this certification from each end-user client during the account setup process.
In addition, we must provide each end-user/client with a copy of the Notice to Users of Consumer Reports. Each client should read and be familiar with the contents of this document.
Hire Level will provide each end-user with FCRA-compliant background check forms.
Using Consumer Reports
Before taking any adverse action (which includes “a denial of employment or any other decision for employment purposes that adversely affects and current or prospective employee”) based on a consumer report, an employer must provide the candidate a copy of the report and a written description of the candidate’s rights under the FCRA. This allows the consumer to review the information and, if they feel the information is inaccurate or incomplete, dispute the information in the consumer report.
After taking any adverse action, the employer again must notify the consumer that adverse action has been taken based in whole or in part on a consumer report. Further, the employer must provide the individual with:
- The name, address and telephone number of the reporting agency (including the toll-free number of a national agency);
- Notice of the person’s right to obtain an additional free copy of the report by making the request within 60 days;
- Notice of the person’s right to dispute the accuracy or completeness of the report with the consumer reporting agency; and
- A notice that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the person the specific reasons why the action was taken.
Adverse Action Assistance
To help employers maintain compliance with the requirements of the FCRA, we offer Adverse Action Assistance. When you intend to take adverse action against an applicant or employee, based on a consumer report or an investigative consumer report, we will send all of the legally required information to the candidate via USPS certified mail within 24 hours of your decision.
What do we send?
- Notification that an employment decision is pending due to information contained in the report
- An invitation for the consumer to contact the company directly if they wish to explain and/or provide mitigating information related to their consumer report (to comply with EEOC guidelines)
- A complete copy of all consumer reports pertaining to the individual
- A copy of A Summary of Your Rights Under the Fair Credit Reporting Act
- Our contact information in the event that the consumer wishes to dispute information contained in the report or to request another copy of their report
- Notice of the final employment decision / adverse action
- Our contact information as the consumer reporting agency that provided the report
- A statement informing the consumer of their right to obtain another free copy of the report within 60 days
- A statement that we did not make the decision and are unable to provide specific reasons why adverse action was taken
- A statement informing the consumer of their right to dispute the accuracy or completeness of any information in the report directly with the CRA
All of these steps must be completed to be in compliance with the FCRA. For a nominal fee, we can assure your compliance with these regulations.
Fair Credit Reporting Act (FCRA) – full text
Fair and Accurate Credit Transactions Act (FACT Act) – full text. The FACT Act is a 2003 amendment to the FCRA.
State Consumer Reporting Laws
In addition to the federal FCRA, employers must also be aware of state consumer reporting laws that govern the use of consumer reports. Many states have enacted legislation regarding consumer reports that may be more restrictive than federal law. We suggest you consult your legal counsel to determine if your policies and procedures are compliant.