10 Facts About FCRA Compliant Background Checks

The Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies. When information is used to make hiring decisions, you must ensure you are FCRA compliant.

Under the Fair Credit Reporting Act employers are required to ensure:

  1. Potential employees receive written notification. An applicant or employee must be informed that you will be obtaining their consumer report, and might rely on the information within to make decisions regarding their employment or advancement. This written, stand-alone documentation cannot be included in the body of another release form; it must be presented in a clear and concise format that does not detract from the information.
  2. Written permission is granted. In addition to providing the written notification form, you must also obtain written permission from the subject. This can be part of the notification document, but must be signed and should also clearly state that you will periodically access the subject’s consumer reports throughout their time of employment, should you intend to do so.
  3. Certification of compliance.  After providing the required notification and obtaining permission, it’s also necessary to certify compliance and that the applicant has been informed and permission has been received.
  4. There is proof of FCRA compliance. Certification that you have complied with all aspects and requirements of the Fair Credit Reporting Act is also a necessary part of FCRA compliance in regards to background checks for employment purposes.
  5. There is a non-discrimination policy in place. Documented certification that you will not discriminate against the subject in regards to employment or misuse the information you obtain in any way, and will also adhere to any equal opportunity laws is also required when accessing consumer reports, as stated by FCRA.
  6. State laws are followed. In addition to the federally-mandated FCRA requirements, there may also be state laws that relate to or even prohibit the use of consumer reports for employment purposes. Because the Fair Credit Reporting Act does allow this, it can become confusing.
  7. There is written notice and documentation of adverse action. Making the decision to take “adverse action,” such as choosing not to hire or promote the subject, based on the information obtained through a background check requires that the employer provides notice of that fact to the subject.
  8. There is an explanation of rights. A subject who has not been chosen for employment or promotion based on information contained in their consumer report must also be informed of their rights, including the right to see the information and also to correct any inaccuracies. This notice must include the contact information of the company that supplied the report, a notice of rights regarding disputing inaccuracies and a statement that denies the reporting agency’s decision-making power in a hiring or promotion capacity.
  9. Lawful disposal of reports. The Fair Credit Reporting Act also covers the acceptable methods of disposal for sensitive personal information found in consumer reports in order to protect from identity theft and other privacy violations.
  10. Information is handled properly.  Due to the economic trouble and the collapse of the housing market, more and more upstanding Americans are finding themselves facing foreclosures, repossessions and bankruptcies that destroy their credit rating and consumer report information. As employers use this information as grounds for passing them over for jobs or promotions, claims and lawsuits regarding “credit check discrimination” are on the rise. Accessing a consumer report and using it to make hiring decisions can open you up to these claims.

While all parents should run a thorough background check on their potential nanny, when they do, it’s essential the check is in compliance with the Fair Credit Reporting Act. A background screening professional can help walk you through the process of legally obtaining and processing information about a nanny candidate, which can guide you to the right hiring decision.

10 Ways of Using Background Checks that are Illegal

Though the background check and private investigation industries are booming in the post-9/11, Patriot Act world, there are still laws that govern the method of conducting such a search and the legal use of the information obtained. Here are ten of the ways that a background check can cross the line between “legal” and “illegal.”

Background checks with illegal components:

  1. Are conducted without disclosure. Though it is perfectly legal and well within an employer’s rights to use information pertinent to the type of work required that they’ve obtained through a background check to make hiring or promotional decisions, it is not legal to do so without the subject’s written permission and consent.
  2. Use outdated information. Although the history of an applicant may go back many years, some states put restrictions on how far back in a candidate’s history employers can consider.
  3. Use data that is not permissible. Some states restrict the types of information that can be used for pre-employment screening.
  4. Access consumer reporting information without permission. Accessing a person’s credit report or consumer information cannot be done legally without their permission. The Fair Credit Reporting Act makes it a crime to view this information without written authorization and extensive documentation.
  5. Take adverse action without explanation. When a background check is used for employment purposes and the resultant information leads to the decision not to hire, to terminate employment or to deny a promotion, federal law states that the information must be disclosed to the subject.
  6. Are used for identity theft. One of the most destructive and widely committed crimes in the United States is identity theft. Conducting a background check and using the personal information obtained to assume a person’s identity is a highly punishable offense.
  7. Use the information to discriminate. Discriminating against a current or potential employee due to information regarding sexual orientation, religion or race that is obtained through a background check places an employer in violation of hiring discrimination laws in the United States.
  8. Access Information that is not a matter of public record without authorization. Even if the information will never be used for illegal gain or profit, accessing private information that is not a part of the public record without the express permission of the person in question is illegal.
  9. Conduct a search through illegal channels. Obtaining information, even publicly available information, through improper channels such as “calling in a favor” with those who have access due to government or law enforcement jobs is against the law. It’s also highly unethical, and could cost the person who accessed the information for you to face unpleasant consequences.
  10. Access medical information. Accessing medical records for any reason without the patient’s permission is also illegal, as this information is closely guarded and is not considered a matter of public record.

All background checks must be conducted in accordance with the Fair Credit Reporting Act (FCRA). To ensure compliance, it’s best to contact an experienced professional with any questions that you may have regarding a background check and the legal use of the contained information.

10 Reasons Background Checks Require the Approval of the Subject

Though some information is a matter of public record and can, as such, be accessed by anyone compelled to seek it out, there are certain situations in which a background check requires the approval of the subject.

Here are ten of the reasons why written consent of a nanny candidate is required.

  1. It’s the law. Under the Fair Credit Reporting Act, potential employees must be informed of your intention to conduct a background screening and to use the information acquired in your hiring decision – and give written authorization for you to do so.
  2. To prevent discriminatory hiring practices.  Being open and upfront about the use of a background check and the resultant information for hiring purposes and obtaining information to do so can not only prevent allegations of discrimination, but is also an effective way of protecting the subject from such discrimination.
  3. To protect you from litigation. The slightest improper use of information obtained via background check run without permission can open the door for dozens of lawsuits. Being sure that subjects are fully informed and have given written permission for the background check is the best possible way to prevent litigation.
  4. To access consumer report information.  If the information you expect a background check to return has any credit or consumer reporting information, it is required by federal law and the Fair Credit Reporting Act.
  5. The information is being used in a hiring decision.  Even if information is part of the public record, it is of the utmost importance that employers get written permission before running a background check to make hiring, promotion or reassignment decisions.
  6. To protect the subject in the event of erroneous information. Obtaining the permission of the subject and providing them with the information returned by the investigative agency is the best way to avoid making decisions that affect a person negatively if the allegations are false.
  7. Because the information isn’t public record. Obtaining information that is sealed by the court system or otherwise unavailable to the general public will require the permission and cooperation of the subject.
  8. As a fulfillment of third party investigative companies’ requirements.  Regardless of the legal requirements, some investigative agencies or companies that specialize in background checks will still insist on receiving written permission from the subject before providing results.
  9. For ethical reasons. The ethical implications of accessing a person’s history and personal information against their will and without their knowledge are both complicated and far-reaching. The best way to avoid a troubled conscience or any allegations of unethical behavior is to be honest about your intentions to run a background check, and to receive the subjects express permission before proceeding.
  10. The candidate may learn you conducted a check. The candidate could inquire to a credit reporting agency to learn who has reviewed their credit.

These are just a few of the reasons why it’s always best to get the permission of the person in question before accessing their past and potentially invading their privacy.

10 Reasons Companies Get Sued Over Background Checks

Though background checks are becoming an accepted part of the hiring process for most Americans in the post-9//11 world, there are still situations in which job candidates and current employees take legal action as a result of feeling that their rights have been violated. These ten situations can result in lengthy and expensive lawsuits for companies that don’t follow the ethical and legal guidelines to background checks.

  1. Failure to run one. Companies that opt to forgo a background check during the hiring process could find themselves in hot legal water if that employee later commits a crime against a client and it’s found that the employee had a criminal history that went undisclosed due to the company’s lack of diligence.
  2. Discrimination.  In the realm of workplace-related lawsuits, discrimination claims are among the most common. If a company is suspected of discriminating against a candidate or current employee for information about their sexual orientation, religion or other protected status, they are in danger of legal action.
  3. Taking adverse action without notification and explanation. Refusing a position or promotion based on information obtained through the candidate’s consumer reports is protected by FCRA in states that allow the use of financial information in employment consideration, but doing so requires that the applicant be notified of the reason for the decision. Failure to do so could potentially lead to legal action being taken against the company.
  4. Refusing applicants or employees the chance to dispute erroneous information. One of the reasons for regulations requiring notification in the event of adverse action based on consumer reports is the potential for erroneous information. Denying a job or promotion based on untrue information without allowing the subject a chance to defend themselves is grounds for legal action.
  5. Failure to obtain release forms. Running a background investigation for the purpose of employment without the express permission of the subject can easily lead to a lawsuit. It’s imperative that all release forms be signed and permission be granted before beginning the investigation process.
  6. FCRA non-compliance. There are many steps that a company must take when running a background check in order to be compliant with the Fair Credit Reporting Act. Missing a step, either inadvertently or deliberately, can lead to litigation.
  7. Poorly documented searches. Every step in the background check process should be carefully documented in order to ensure compliance with local and federal law. This documentation can squash a burgeoning lawsuit, but the lack of it could lead straight to the courtroom.
  8. Failure to provide subject with information.  Refusal to share the information obtained on a subject with them can lead to a sticky legal situation, as federal law requires that they be provided with a copy upon request in order to protect them from false entries to their records.
  9. Failure to advise a candidate of her rights. Notification and careful explanation of a subject’s rights is an essential aspect of protection from lawsuits when performing a background check.
  10. Denying a public sector job opportunity based on financial information. In some states, it is illegal to deny a candidate based solely upon a foreclosure or bankruptcy. If a company is found to be in violation of this law, they could be in danger of legal action.

Most lawsuits against employers regarding background checks occur simply because the employer does not take the necessary steps to protect themselves. Skipping through parts of the process in an attempt to speed it up can lead to missing documentation or mistakes that could be very expensive for the business in the long run; it’s best to be thorough and legally compliant from the beginning.