How to Navigate Fair Credit Reporting Act Compliance with Regard to Background Checks

In January 2016, the Society for Human Resource Management predicted an increase in “class-action lawsuits claiming noncompliance with the FCRA.” Their prediction proved correct. This past year, companies such as Dish, Bank of America, and J.P. Morgan Chase all faced Fair Credit Reporting Act related lawsuits.

The Fair Credit Reporting Act governs how and when organizations can request credit reports and background checks in general. Many employers perform routine credit checks as part of their background check and hiring process. These recent lawsuits, however, make Fair Credit Reporting Act Compliance with regard to background checks increasingly important.

Compliance with the Federal FCRA

Under the Federal act, as an employer you must do the following in order to request a credit check or other background check information:

1. Get permission in writing from the prospective employee beforehand
2. Clearly state what you intend to do with the credit report or other background information
3. Abide by that statement and by all laws regarding the proper use of credit reports and background checks
4. If you decide not to hire or if you later fire the individual whose credit or background you checked, provide him or her with a copy of the report
5. Offer him or her a chance to dispute the findings of the credit or background check

Compliance with State FCRAs

Many states (including Arizona, Georgia, Kansas, Maine, Massachusetts, Minnesota, New Jersey, New York, Oklahoma, and Washington) have their own credit check laws called mini-FCRAs. In California, for instance, employers can perform credit checks only when filling certain positions. In addition to Federal FCRA compliance, employers must stay compliant with any FCRA laws in their state.

At TruDiligence, we specialize in FCRA compliant employment screening. Contact us for more information about navigating the Fair Credit Reporting Act.