Fair Credit Reporting Act: What Employers Need to Know

law-and-magnifying-glass on CriminalData.comWhat do employers need to know about complying with the Fair Credit Reporting Act (FCRA)? It may seem unlikely that you would have to worry about legislation designed to protect consumers against unlawful use of their credit and personal information. But you must comply with FCRA if you:

Want to check the credit history of an applicant for a cash-handling position;

Intend to promote a long-term employee, but want to be certain they have a good credit record;

Have already obtained a credit history on a job applicant, which is unfavorable; however, it is a lack of experience, not the credit record, that impacts your decision to not hire this person.

Employers are entitled to run consumer credit reports on applicants or existing employees at any time, providing they comply with the FCRA. Employers who use consumer reports have legal obligations under FCRA, which was designed to prevent applicants from being denied jobs or employees being denied promotions unjustly.

You cannot obtain a consumer report until employees or applicants have given their written permission for you to do so. This cannot be accomplished on the employment application.  A separate disclosure must contain the proper notification, and the employee must sign it.  If employees gave permission in the past, you must ensure that they receive a separate notice stating that reports may be obtained over the course of their employment. 

So, what if you didn’t include the disclosure and obtain permission during the hiring process and now you want to run reports on your employees? You must notify employees and get their written permission before you run the reports.

Who can supply pre employment screening reports to ensure an employer is in compliance? To be covered by FCRA, employers must use employee screening reports provided by a Consumer Reporting Agency (CRA). The reports can range from simple credit checks to criminal, housing, employment, and driving record checks. 

The FCRA requires employers to comply with reporting requirements. These include: 

Certifying that the employer is obtaining information for employment purposes;
The proper disclosure has been provided to and written authorization has been obtained from the applicant or employee; 
The applicant or employee will be provided with a copy of the report;
And the information will not be used in violation of equal opportunity laws.

What happens if you deny an applicant or a promotion based on information you obtained from a CRA? 

Before you take adverse action, such as terminating an employee, or denying a job or a promotion, you must give the individual a pre-adverse action disclosure, including a copy of their consumer report and a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act.” This document can be provided by your CRA.

After you have taken adverse action, you are required to give the individual notice, either orally, electronically, or in writing, that the action has been taken. The notice must include the name, address and phone number of the CRA that supplied the report, as well as a statement that the CRA did not make the decision for adverse action and cannot give specific reasons for it. In addition, the individual must be notified that they have the right to dispute the accuracy or completeness of the information and their right to obtain a free report from the agency within 60 days.

For more information on pre employment screening, including everything you need to know about consumer and credit reports, go to

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