The Fair Credit Reporting Act (FCRA) is federal legislation that upholds the accuracy, fairness, and privacy in data used by consumer reporting companies. Financial organizations that need to review your credit report to determine if you qualify for a loan must follow FCRA. Likewise, hiring companies that want to use an agency to pull a background check on a candidate must follow FCRA requirements.
The legal landscape regulating human resource activity is always changing. What’s more, FCRA has many nuances that are often misunderstood by well-meaning recruiters and hiring managers. The experts at Trusted Employees share the most common misconceptions about FCRA-compliant background checks so you can know the facts:
1. Misconception: If I don’t run a credit report, I don’t need to worry about FCRA.
Fact: Any time you use a consumer reporting agency to obtain background information, you must follow FCRA regulations, even if you don’t plan to run a credit report.
2. Misconception: My third-party reporting agency states it’s FCRA compliant, so the liability is on them, not me.
Fact: While it’s important to always work with agencies who follow strict FCRA guidelines, there is no way they can be completely liable for FCRA compliance because they are not involved in your hiring decisions or actions. They simply supply the FCRA background check. It’s up to you to follow fair hiring practices and communicate information correctly to candidates via FCRA requirements.
3. Misconception: I must include the background check authorization form to all applicants.
Fact: The employer must notify the applicant in writing to get permission to run the FCRA background check, but this notification needs to be separate from the employment application.
4. Misconception: I do not need to explain why I’m running a background check.
Fact: You might think it’s apparent that if you (the employer) want to run a background check that it’s for the purposes of evaluating employment potential, but you must always be clear and concise with your intentions. In addition to notifying and getting permission to run FCRA background checks, you must also tell applicants that you may use the information found to inform your hiring decisions.
5. Misconception: If I find something on the FCRA background check I don’t like, I can just tell the candidate that’s why I’m not hiring them.
Fact: You must follow specific guidelines when taking adverse action based on information you found on the background check. Per FCRA requirements, this must include pre-adverse action communication and reasonable time for the candidate to respond. If you’re in this situation, it’s important to learn more about how to lawfully reject candidates.