What Is the FCRA?

FCRA stands for the “Fair Credit Reporting Act”. The FCRA is the federal and state laws on background checks for employment decisions. While background checks are legal for hiring employees, you need to make sure you are complying with the law. Not following the laws set in place by the FCRA will result in having to pay expensive fines and dealing with lawsuits.

When to Follow FCRA Rules?

All companies and employers are required to be FCRA compliant when conducting background checks through “consumer reporting agency” or CRA. A CRA is any company that specializes in performing background checks or any research on job applicants or employees on behalf of the employer. If you are not going through a CRA and doing the employment screening yourself then you are not required to follow the FCRA, however states may still have restrictions.

Key Points to Remember About the FCRA

Some key points to remember about the FCRA is that you must comply before obtaining a background check and after conducting a background check. 

Before Conducting a Background Check

Before conducting a background check, the employer must provide a written notice that the background check may be performed, this must be clear and must not contain any other information on the written notice. The employer must also receive written consent from the applicant or employee before the search is conducted.

After Conducting a Background Check

Once a background check is completed on a potential hire or current employee, if the employer decides to take action there are a few rules to be followed. Before any action is taken the employer must inform the potential employee or the current employee action is being considered. This pre-notice must contain a copy of the report as well as a copy of  ”A Summary of Consumer Rights under the FCRA.” After the pre-notice the FCRA requires a notice that contains:

  • Information from the CRA including name, address, and phone number
  • Notice of action is being taken in whole or in part from information in background check
  • A statement of the CRA was not involved in the decision to take action
  • A notice that the applicant or employee has a right to dispute the report for accuracy or completeness, and a free report from the CRA within 60 days

For more information on the Final Notice Of Adverse Action

Penalties for Not Complying With The FCRA

Not complying with the FCRA has major penalties that can be very expensive. Any person who willfully fails to comply with any requirement imposed is liable to any actual damages sustained by the consumer of not less than $100 and not more than $1,000. Obtaining a background check under false pretenses or knowingly without a permissible purpose, actual damages sustained by the consumer as a result of the failure or $1,000, whichever is greater. Attorney fees may also be awarded, in some cases damages have no set limits. For more information on penalties for not complying with the FCRA

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