Employers should be aware and understand their requirements under the Fair Credit Reporting Act (FCRA) before requesting and obtaining consumer reports.
The name of the act “FCRA” is a misinterpretation. The word “Credit” in FCRA should be replaced with “Consumer” to accurately portray the language in the act. “Consumers” are individuals, better known to employers as employees and applicants. The FCRA was originally enacted to allow fair and accurate consumer reports to the banking system but later included language to cover other reasons such as employment and tenant screening.
The FCRA limits negative information that can be reported based on the date of the offense and salary of the employee. Criminal cases ending in convictions (guilty cases) have no limit on how long they can be reported. Non-conviction criminal cases (dismissals, acquittals, etc.) are reportable within 7 years of the offense unless the applicant is expected to make less than $75K annually. If the employee is expected to make more than $75K annually, all records are reportable under federal law. At DATCS, we review each order for general compliance with the FCRA and other best practice guidelines. Although, many states have their own versions of the FCRA, the FCRA preempts conflicting state laws. 15 USC §1681t prohibits states from prescribing content of consumer reports after 1996. Texas, among others, is one of the states that have regulations enacted after 1996 and is preempted by the FCRA. State laws can vary so be sure to check with your own state law requirements.
| FCRA Limitations & Exceptions | |||
| Age < 7 years | Age > 7 years, wages <$75K | Age > 7 years, wages >$75K | |
| Criminal cases ending in conviction (guilty) | Reportable under federal law | Reportable under federal law | Reportable under federal law |
| Non-conviction criminal cases (dismissals, acquittals, deferred adjudication) | Reportable under federal law | Excluded under federal law | Reportable under federal law |
Under FCRA, employers have three basic duties:
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- Provide a certification to the CRA (Credit Reporting Agency).
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- Make disclosure and obtain authorization from employees.
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- Comply with the adverse action requirements.
The first duty is simple enough; you must identify yourself to the CRA and certify that you will be using consumer reports as a permissible purpose under the FCRA (employment) and comply with the law.
The purpose for the employee disclosure is to inform the employee that you will be performing a background check. Background checks should not be a secret. The disclosure should be clear and in writing, and in a document that consists only of the disclosure. The document should not be hidden in an application for employment. Employers are also required to obtain authorization or permission to perform a background check on an employee. This must also be made in writing and may be included as part of the disclosure. The FCRA does not prohibit an employer from taking adverse action against an applicant who refuses to give authorization.
Adverse action is any negative action against an employee (e.g. denial of employment, termination). Adverse action is broken into two steps, “pre adverse action” and “post adverse action”.
Before taking adverse action, the employer must provide the consumer with a copy of the report and a summary of the consumer’s rights under the FCRA. This document may be obtained from the FTC website at http://www.consumer.ftc.gov. Next is the “waiting” requirement. Before taking adverse action, the employer must wait a reasonable period of time. The FCRA does not define the time period that is considered “reasonable”, so one week is recommended. This is basically to allow the consumer time to dispute the accuracy of the test.
Does this mean a consumer report can be inaccurate? Yes, but it’s a rare occurrence. There are literally billions of criminal records available and the FCRA recognizes that it is possible for records to be inaccurate due to identity theft or misidentification. Be sure you are verifying identity information from your applicants (e.g. name, date of birth, SSN, previous addresses) and using the validation tools in your DATCS certified screen web system.
Last is “post-adverse action”. The employer must (1) provide notice of the adverse action to the consumer, (2) provide the consumer with contact information for the Credit Reporting Agency (CRA) that prepared the report, and (3) provide the consumer with a summary of rights under the FCRA.
Contact DATCS at 1-888-201-0242 more information about implementing background checks into your workforce.