Backgrounds Online's Knowledge Bank

The Fair Credit Reporting Act sets the standard for how an employer collects and uses background information in determining whether or not an applicant is qualified for a position.

The FCRA was issued by the Federal Trade Commission. The FCRA regulates Consumer Reporting Agencies (CRA’s) which are any groups that collect and disseminate information about consumers to be used for credit reporting or certain other purposes. Employers who conduct their own background checks do not need to follow the FCRA, but put themselves at greater liability.

Under the FCRA, the employer must obtain, in writing, permission from the applicant to complete the background check. Furthermore, should the employer decide not to hire an applicant based whole or in part of on the results of the background check, they must send the applicant a pre-adverse action letter and allow that person a reasonable time to dispute the report. Furthermore, if a contention is not made or the employer still decides to not employee the applicant, the FCRA states that the employer must send the applicant the adverse action letter.

By following the FCRA, employers help protect themselves from liability. Not utilizing a CRA to conduct pre-employment screening and then incorrectly denying a person employment can open the employer up to a potential lawsuit.