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Employer Background Checks Under the Federal Fair Credit Reporting Act (FCRA)

How to properly run background checks on employees under the Fair Credit Reporting Act.

Obtaining the Employee or Applicant's Notice and ConsentThe federal Fair Credit Reporting Act ("FCRA") requires employers to notify and obtain the consent of the individual whose report is requested before obtaining a consumer report.[1] To do so, the employer must provide the individual with "a clear and conspicuous disclosure" that a consumer report may be obtained for employment purposes.[2] This disclosure must be in a stand-alone written document.[3] Additionally, the employer must also obtain the individual's written consent, which can be done on the same form as the disclosure.[4]Conditions for Taking an Adverse ActionBefore taking any adverse action based on information contained in a consumer report, employers must provide a "Pre-Adverse Action Notice" to the individual, including:

  • (1) a copy of the consumer report, and
  • (2) a copy of the document entitled "A Summary of Your Rights Under the Fair Credit Reporting Act."[5]

The purpose of the Pre-Adverse Action Notice is to allow the applicant to review the report and correct any inaccuracies before an adverse action is made.[6] After this notice is made and the employee has had a "real opportunity"to correct any errors, the employer may continue with an adverse action. Id. Upon taking an adverse action on the basis of information contained in the consumer report, the employer must provide the individual with an "Adverse Action Notice,"including:

  • (1) notice of the adverse action,
  • (2) the name, address and telephone number of the consumer reporting agency that furnished the report, and
  • (3) notice of the individual's right to obtain a free copy of the report within 60 days, and to dispute the accuracy or completeness of the information in the report.[7]

If the adverse action is based on the applicant or employee's numerical credit score, the employer is also required to provide the following information:

  • (1) The range of possible credit scores under the credit scoring model used;
  • (2) The date on which the credit score was created;
  • (3) The name of the person or entity that provided the credit score or the credit file used to create the credit score; and
  • (4) The key factors, listed in order of importance, which adversely affected the consumer's credit score in the credit score model used.[8]

________________________________________________________________________________[1] A "consumer report" is any information from a consumer reporting agency that bears on a consumer's credit, character, general reputation, personal characteristics, or mode of living, including criminal background. 15 U.S.C. § 1681a.[2] 15 U.S.C. § 1681b(b)(2).[3] 15 U.S.C. § 1681b(b)(2).[4] 15 U.S.C. § 1681b(b)(2).[5] 15 U.S.C. § 1681b(b)(3)(A).[6]Moore v. Rite Aid Hdqtrs. Corp., 33 F. Supp. 3d 569, 574 (E.D. Pa. 2014); Manuel v. Wells Fargo Bank, Nat. Ass'n, 2015 U.S. Dist. LEXIS 109781, 2015 WL 4994549 (E.D. Va. Aug. 19, 2015).[7] 15 U.S.C. § 1681m.[8] 15 U.S.C. § 1681m(a)(2)(B); 15 U.S.C. § 1681g(f)(1).

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