FCRA Compliant Hiring Best Practices
What is The Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act, passed in 1970, is a federal law that regulates the credit
reporting industry. The FCRA is a law that governs the collection, assembly, and use of
consumer information. It provides a framework for the credit reporting system in the
United States, including consumer credit information. FCRA also regulates the practice
of Consumer Reporting Agencies that collect and compile consumer information into
reports for use by credit grantors and insurance companies.
The act gives consumers the right to access their credit reports and dispute any
inaccurate information. It also requires credit bureaus to provide consumers with a free
copy of their credit report every year. The act has been amended several times over the
years, most recently in 2015, to expand consumer protections.
What employers should know about the FCRA and its impacts
According to a study conducted by the Professional Background Screening Association
(PBSA), the U.S. Department of Labor reports that 93% of corporations within the zip
code perform some type of background screening. This percentage is unsurprising
since screening for potential hires is crucial to the smooth running of a company’s
day-to-day operations while also protecting its employees and only assets.
The Fair Credit Reporting Act (FCRA) is a federal law that regulates the use of credit
reports by employers. The FCRA requires employers to get the consent of job applicants
before they run a credit check, and it prohibits employers from discriminating against
job applicants based on their credit history. Employers who violate the FCRA can be
sued by job applicants. As a business that uses third parties to conduct background
checks on job candidates or existing employees, you are obligated to follow the federal
Fair Credit Reporting Act (FCRA).
FCRA Best Practices for employers
Employers are constantly looking for ways to improve their business. There are many
best practices that employers can implement to be more successful. Here are some
practices that employers should continue to keep in mind:
- Inform the individual that a criminal background check may be performed for
- Authorize the individual for the criminal background report to obtain the report.
- If a criminal report contains any negative info that might prevent you from taking
various actions or from agreeing to a particular candidate for a position, you
must provide a copy of this report to the candidate and the FCRA Summary of
- Give your potential employee enough time to contact the courtroom to negotiate
the background check report before finalizing your hiring decision.
- If the appropriate time has passed, you may resort to adverse action. Let the
person know that you will take this adverse action. Generally, notice should be
given, but it allows you to communicate in writing as well.
- Broad across-the-board criminal background exclusions should be limited.
- Make efforts to avoid and steer clear of broad criminal offense classifications.
- Assess individual criminal justice process applicants on an individual basis.
- Consider state laws restricting the pursuit and usage of criminal public records.
FCRA Tips for Employers conducting a background check
● Get consent from employees before running a credit check
Running a credit check on an employee without consent can lead to legal trouble for the
employer. To protect both the employer and the employee, it is best to get written
consent from the employee before running a credit check. This will help to ensure that
everyone is aware of what is happening and that there are no surprises. Safeguarding
data While many companies have very strict policies regarding the protection of
employee data, more and more are following a model where the information is shared
only with those who need it. This includes making sure that employees are trained on
how to handle their own personal information.
● Securely destroy all old internal reports
You should properly shred, pulverize, or burn paper documents and sanitize electronic
documents in order to prevent accessing or reconstructing it.
● Wait five days before making a final determination
While the statutory provision pertaining to the Fair Credit Reporting Act doesn’t explicitly
say it, courts and FTC guidance advise waiting five days before the decision-making
process any time the applicant is informed about the information that may disqualify
her from employment.
● Review state and local background check laws
Just be sure to find out about the state laws where your business is working and
employing individuals. Some states prohibit the sole proprietor or business entity from
considering or inquiring into certain types of employee records for employment. As an
example, California does not allow companies to choose or seek information about
certain types of convictions, including an arrest or detention.
● Position the notice with a clear, different indicator
Be sure that it’s a separate written document. Don’t forget to not simply include it in the
job application. Be as distinct as possible when making the notice.
● Hire a PBSA accredited background screening firm like Securecheck360
When it comes to background screening, you want to make sure you are getting the best
possible service. One way to do that is by hiring an FCRA-compliant accredited firm like
Securecheck360. We ensure that your screening process is as thorough and accurate as
possible. Being PBSA accredited means that all screenings have been through a
rigorous process that evaluates based on best practices and controls against industry
By following the best practices for employers above, you can ensure your business is in
compliance with the FCRA when hiring employees and when making retention
decisions. Remember, it is always important to consult with an attorney if you have any
questions about the FCRA or how it applies to your specific business. The Fair Credit
Reporting Act is a complex law with many stipulations that employers and employees
should be aware of. If you have any questions about the Act or employee background
checks, be sure to consult with an employment lawyer.