FCRA Compliance


FCRA Compliance

Are you using our background checks for employment purposes? If so, then you are legally required to follow the requirements of the Fair Credit Reporting Act (FCRA), a federal law that protects the privacy and rights of the subjects of consumer reports. Background checks used for employment purposes qualify as consumer reports, which means that they are subject to the FCRA

Note that “employment purposes” includes not just part-time or full-time employees but also contractors, temporary workers, agents, volunteers, and other roles. Whenever you are using a background check to vet someone for any of these positions, you must follow the FCRA requirements listed below.

What is the FCRA?

The Fair Credit Reporting Act or FCRA was enacted in 1971 to ensure that consumer reporting agencies always exercised their responsibilities with fairness, impartiality, and respect for the consumer’s right to privacy. The FCRA protects the subject of a check by putting limits on what a consumer reporting agency can report.

Even though it is named the Fair Credit Reporting Act, the FCRA applies to much more than credit reports. Applicable reports can include the consumer’s credit standing but can also extend to character, reputation, mode of living, and similar information that may determine eligibility for credit, insurance, or a job. By these standards, background screening companies are among the consumer reporting agencies that the FCRA regulates.

Within the FCRA, there are several rules about what agencies can report. For instance, bankruptcy cases can be no older than 10 years. All other adverse information, with the sole exception of criminal convictions, can be no older than seven years. No medical information can be shared on consumer reports unless the report is for insurance purposes.

In addition to protecting the consumer once a check is underway, the FCRA requires an employer to disclose their intention to run the check and obtain the subject’s permission before the check can legally begin.

Before using our services

Before conducting a background check for employment purposes, educate yourself on the requirements of the FCRA. One essential document to read is the Consumer Financial Protection Bureau "Notice to Users of Consumer Reports."

Before the check

The first steps of the background screening process are straightforward for both the employer and the applicant. 

First, as the employer, you must give the applicant a disclosure form. The disclosure form informs the candidate that you will be checking their background for employment purposes. This disclosure must be separate from any other documents—for instance, you cannot couple the disclosure form with your organization’s employment application or a release of liability.

Second, the applicant must sign an authorization that permits the employer to run a background check. Similar to the disclosure form, the consent authorization form must be presented separate from most other application documents or job information. 

The FCRA permits the disclosure form and the authorization form to be combined, though they can also be presented separately. If you do choose to combine the two documents, note that the combined form cannot contain anything other than disclosure and authorization. 

One test for whether the form is FCRA compliant is to check whether each sentence can begin with either "We hereby disclose to you that ..." or "You hereby authorize us to ...". If not, then there is likely extraneous information in the form that might threaten its FCRA compliance. Always consult with legal counsel when preparing these documents to ensure that they follow the letter of the law.

The primary purpose that these disclosure and consent forms serve is to comply with the FCRA. These forms also give the background screening company permission to perform the check, and they may serve as verification to former employers or schools that they are permitted to give out information.

For a better understanding of why proper presentation of disclosure and consent documents matters, read this article about a court ruling from 2017. A court found that FCRA disclosures containing waivers were “willful” violations of the FCRA simply because they incorporated additional liability waiver terms.

Realize that these rules of proper disclosure and authorization don’t just apply to criminal history checks. In any situation where backgroundchecks.com obtains information for you based on an interview (for example, during reference checks), you must provide additional disclosures to the subject as follows:

  1. You must inform the subject that you are obtaining an investigative consumer report about them, including information about character, general reputation, personal characteristics, or mode of living. 
  2. You must inform the subject that they have a right to request a description of the nature and scope of the investigation. If the subject requests that description, you must provide it within five days. 

Before the decision

If a background check returns no red flags, the employer may choose to move forward with hiring the subject of that report. In these situations, the employer has no more remaining obligations under the FCRA.

However, if the employer decides to rescind a job offer or disqualify a candidate based on background check findings, additional FCRA requirements apply. In the parlance of the FCRA, this decision is “adverse action.” Employers considering adverse action based on background check findings have a series of FCRA obligations that they must follow before they consider or hire another candidate.

Specifically, if you are the employer, the FCRA requires you to send the candidate a “pre-adverse-action notice” before you officially finalize your decision. The pre-adverse action notice must include a copy of the background report and the Consumer Financial Protection Bureau’s summary of rights. 

You must send this pre-adverse notice a “reasonable time” before making a decision based on the report. The Federal Trade Commission states that five business days is a reasonable amount of time when the notice is delivered by first class mail. If that five-day period elapses without a response from the subject, then you may move forward with a decision based on the background check report.

If the subject disputes the background report or pre-adverse notice, then you must halt the hiring process. Under the FCRA, you are not permitted to move forward with adverse action until after the background check company has resolved the candidate’s dispute.

On the decision

If the subject does not respond to the pre-adverse action notice, you can officially take action and move forward with the hiring process. Similarly, if the background check company pursues the subject’s dispute but rules that the information included in the report is accurate, you can formally take the candidate out of employment consideration.

In either case, when you do officially take adverse action based on a background check report, you must take several additional steps to comply with the FCRA. These steps include the following:

  • Notify the subject of the decision
  • Notify the subject of the background check company’s business name, address, and telephone number
  • Notify the subject that the background check company did not make the decision
  • Notify the subject that they can request another free copy of their background report from the consumer reporting agency (the background check provider) within the next 62 days
  • Notify the subject that they can dispute any inaccurate or incomplete information in the report by contacting the background screening agency

In addition to these rules, many states (notably California) have extra requirements in place concerning the use of a background check company’s services.

backgroundchecks.com provides forms online and assists you with compliance

At backgroundchecks.com, our customers have access to a dedicated compliance area in our web-based order system. The following FCRA compliance support is available through that system:

backgroundchecks.com can help with electronic pre-adverse and adverse action services

If you want us to handle this process, you will only have to provide the email address of the applicant during the order process. The video will give you a quick overview of the process.


What does FCRA compliant mean?

Staying compliant with the FCRA requires employers to follow a federal law called the Fair Credit Reporting Act (FCRA) to the letter. This law includes specific requirements regarding how employers use background checks for employment purposes. Specific sections of the FCRA cover nuanced guidelines for background check disclosure and authorization and what employers must do if they wish to disqualify a candidate from job consideration based on background check findings. Employers should establish written background screening policies that incorporate FCRA requirements.

What does FCRA mean on a credit report?

FCRA stands for “Fair Credit Reporting Act.” It is a federal law enacted in 1971 that regulates the consumer reporting agency industry and protects consumer privacy. All credit reporting bureaus are subject to the FCRA, including all background check companies.

How do you comply with the FCRA?

All employers that wish to use background checks to guide employment decisions should review the FCRA in detail and seek guidance on FCRA compliance from their attorneys. 

What are my rights under FCRA? 

The FCRA regulates consumer reporting agencies so that they conduct their business in fair, impartial, and respectful ways, particularly regarding consumer privacy. As a job seeker, the FCRA protects you throughout the pre-employment background check process. No employer can launch an investigation of your background without first disclosing their intention to do so and obtaining your express written consent. In addition, employers cannot disqualify you from job consideration based on background check findings without first notifying you and giving you a chance to dispute those findings

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