The FCRA: Are You Compliant? (Part 1)

Posted by on August 21, 2013 in Business Management, Employee Background Checks, Legal Matters for Business [ 0 Comments ]

fair credit reporting act complyPre-employment screenings and background checks for businesses looking to hire are becoming more important than ever. According to one recent study, 53% of resumes and job applications contain falsifications. While background checks can protect your business and help you ensure you’re hiring someone who is who they say they are, you have to be compliant with the FCRA. The Fair Credit Reporting Act (FCRA) is a United States federal law that protects the accuracy and privacy of the information found in consumer reports, such as background checks. When evaluating pre-employment screening and background check providers, make sure you take a look at how they comply with these guidelines.

Related: Get quotes from background check providers.

Adverse Reporting

The FCRA limits the scope of adverse information that a consumer reporting agency (CRA) can provide its customers, i.e. employers. In addition to the federal guidelines, some states may also further limit the information that can be reported. There are also some reporting restrictions that could apply to certain types of information within the report.

  • When information within a background check is of public record and likely to have an adverse effect on employment opportunities, the CRA must either notify the applicant that the information is being reported and to whom or maintain strict procedure to ensure the public information is complete and current.
  • When an “investigative consumer report” is conducted, information is collected through personal interviews and a CRA cannot report the adverse report information unless they followed procedures to confirm the information with another source or the person being interviewed is the best source.

Related: 5 Signs That Your Business Needs Pre-Employment Screening

Consumer Rights to File Disclosure and Disputes

Your background check provider must ensure applicants and employees that have consented to a background check are able to obtain a “file disclosure” from the consumer reporting agency. They must also ensure that candidates and current employees are able to dispute the completeness or accuracy of the information in their file collected and maintained by the CRA. Some of the many consumer rights under the FCRA are:

  • The right to be told if information in a file is being used against them.
  • The right to know what is within their file.
  • The right to ask for a credit score.
  • The right to dispute incomplete or inaccurate information.
  • The right to have inaccurate, incomplete, outdated or unverifiable information corrected or deleted.

The Disposal Rule

Your background check company must take reasonable measures to protect the use or unauthorized access of consumer information when they dispose of it. Disposal methods can include shredding or burning of paper documents or destruction and the erasing of digital media. Any record about an individual which is or is derived from a consumer report must be disposed of properly to insure the applicant or employee’s information doesn’t fall into the wrong hands, such as those who might use the information to “victimize” individuals.

An important thing to note is that financial institutions that are subject to both the Disposal Rule and the Gramm-Leach-Bliley (GLB) Safeguards Rule should incorporate the proper disposal practices of consumer information into the information security program that the Safeguards Rule requires.

Related: Avoid Résumé Fraud with Background Check Software

Adhering to FCRA guidelines is a must for businesses running background checks or conducting pre-employment screenings. Without compliance, your background check process could be doing your business more damage than good. However, these aren’t the only areas of compliance you need to consider. In part two of our FCRA compliance series (coming on Sept. 4!), I’ll discuss the key steps you must take before and after you acquire a consumer report or take action based off the information in a consumer report.

(Image: photostock via freedigitalphotos.net)


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