Employer Requirements under the FCRA

Prior to receiving a consumer report, an employer must certify to the CRA in writing that it will do the following:

Employers must provide a clear and conspicuous disclosure in writing to the applicant before the report is obtained. Also, employers must obtain a written authorization before obtaining a consumer report (15 U.S.C. §1681b(b)). The disclosure and authorization can be combined in a single document, but should contain nothing more than the authorization and disclosure. (See FTC Opinion letter, from Cynthia Lamb, FTC Investigator, to Richard Steer, October 21, 1997).

Employers need a disclosure form for an Investigative Consumer Report (15 U.S.C. §1681d(a)) that is different from the disclosure form needed for an ordinary consumer report. The applicant must be notified within three days that an Investigative Consumer Report has been requested and that he or she has the right to obtain additional information as to the nature and scope of the investigation requested. Additionally, the applicant must receive a copy of the FTC document, “A Summary of Your Rights Under the Fair Credit Reporting Act.”

The adverse action rules apply to decisions not to hire, suspend, or terminate an individual based in whole or in part on a consumer report. If adverse action is intended and before it is taken, an employer must provide the applicant with a copy of the report and the FTC document, “A Summary of Your Rights Under the Fair Credit Reporting Act” (15 U.S.C. §1681b(b)(3)). This is the first notice, also called the Notice of Pre-Adverse Action.

If, after sending out the first notice and related documents, the employer intends to make a final decision not to hire, then the employer must send the applicant a second notice, also called the Notice of Adverse Action. This Notice will inform the applicant of the employer’s final decisions and will provide a copy of the FTC’s form “A Summary of Your Rights Under the Fair Credit Reporting Act.” Additionally, the notice must provide the CRA’s contact information (name, address, and phone number), must advise the individual that (1) the CRA did not take the action and cannot provide specific reasons why it was taken, (2) the individual has a right to dispute the accuracy or completeness of the information, and (3) the individual has a right to another free copy of his or her consumer report within 60 days (15 U.S.C. §1681m).

The FCRA does not indicate how long an employer must wait after sending the pre-adverse action notice before taking adverse action. However, according to the FTC, employers should, “keep in mind the clear purpose of the provision to allow consumers to discuss reports with employers or otherwise respond before adverse action is taken.” (See FTC Opinion letter, from William Haynes, FTC Staff Attorney, to Harold Hawkey, December 18, 1997.) Thus, the applicant must have a meaningful opportunity to review the material and to respond.

Note: The FTC has stated that CRA’s may fulfill an employer’s ministerial duties under the FCRA, and a CRA may send the adverse action letters for an employer. However, the employer remains responsible for any duty imposed by the FCRA and may be subject to liability if the duties are not performed by the CRA. (See FTC Opinion letter, from William Haynes, FTC Staff Attorney, to Michael Rosen, June 9, 1998.)

The following information regarding the FCRA is provided as general guidance to AccuSource clients. The information will address requirements and obligations regarding employment background checking. It is not implied or intended as legal advice. The employer retains the responsibility to understand the FCRA. Because the information provided by AccuSource is general and incomplete, it is recommended that you consult legal counsel for advice.