FCRA Compliant Background Checks: How to manage federal and state FCRA regulations

Federal Fair Credit Reporting Act (FCRA) is designed to protect individuals by promoting accuracy, fairness, and privacy of information in the files of every Consumer Reporting Agency (CRA). Most CRAs are credit bureaus that gather and provide information about individuals – such as if they pay their bills on time or have filed bankruptcy – to creditors, employers, and landlords. When credit checks are considered in employment screening, employers must perform FCRA compliant background checks and adhere to the boundaries with which they can use a person’s credit history when making a hiring decision. Most employers are aware of the federal FCRA regulations that they must follow during hiring procedures. It’s important to note, however, that many states have also passed their own FCRA laws. Understanding and abiding by both federal and state FCRA regulations has become an important skill for hiring managers.

Federal FCRA Regulations

To stay within federal FCRA guidelines, employers must adhere to three primary tenets:

• Applicant consent and authorization to a background check. Employers must disclose that they will be screening and applicants must give consent to the screening.
• Summary of Rights. Candidates must be given “A Summary of your Rights under the Fair Credit Reporting Act” document.
• Adverse Action Procedures. Adverse action includes pre-adverse action when the employer is considering a negative action (no hire, termination or no promotion) based on the results of the background check. The applicant will then have time to review and dispute the report.

These are standard processes now that almost all businesses are aware of and (most) abide by. When it gets to state, however, is when it gets more complex…

State FCRA Regulations

Is your business located in any of the following states? Alaska, Arkansas, California, Colorado, District of Columbia, Kansas, Kentucky, Maryland, Massachusetts, Montana, Nevada, New Hampshire, New Mexico, New York, Texas, Washington If so, in addition to the FCRA regulations above, your state has also enacted its own legislation and placed state-level limitations on what information can and cannot be reported.  Here’s a full PDF on state-level regulations. Take a look and what your state FCRA limitations include. Sound complex? We know how you feel – it is! This is a very high-level overview of how the FCRA may impact your hiring processes – and a couple of key areas to educate yourself on as you get started. If you’re looking for an experienced partner to help, we’d love to hear from you.]]>