FCRA Compliance More Important Now than Ever For U.S. Employers

Large Law Firms in the United States specializing in class action claims have discovered a lucrative revenue stream – Employers that violate the Fair Credit Reporting Act (FCRA), the federal legislation that outlines the process for obtaining and utilizing consumer reports.

There have been an estimated 27 such class action lawsuits in 2014 – close to 40 over the last three years – regarding violations of the FCRA. The majority of these lawsuits are attributed to failures in two important steps in the process – Authorization and Adverse Action.

The FCRA process is not challenging, complicated, or costly, but due to the heavy sense of urgency process of hiring, sometimes follow-through on regulatory requirements becomes a challenge. But be warned those who cut corners in the background check process, that you are putting your company at very real and unnecessary risk.

Over the past three years, several employers have been sued for not requiring an Authorization form to be signed by an applicant prior to processing a background check. But even more frequently than that, employers have been sued for not following the very specific rules of construction for the Authorization Document

The second most common violation being exploited by class action law firms today are against those employers that don’t follow adverse action requirements when making a no-hire (adverse) decision on an applicant based on a consumer report.

For review and reminder on how to comply with the FCRA and keep in line with the EEOC’s guidelines for using criminal records information, A-Check recommends employers follow the process below to safely order a report, evaluate its contents, and decide on how to move forward with a candidate that has made it to this hiring step.

1.Authorization/Disclosure: Obtain permission from the consumer (applicant/employee) prior to processing a background check. The important things to remember in this process are (a) the document consists as a standalone and is not part of a job application or any other document, and (b) do not add any waiver of rights language onto the document itself. A-Check’s latest edition of our Authorization Form kit can be found by accessing this link:

New Authorization Form Kit New 11-2014 (MS Word)

A-Check’s new kit has recently been updated to include language for legally obtaining a credit report to be used in the hiring process in the ten states that require it.

2. Summary of Rights: Provide the applicant a Summary of Rights at the Authorization step if you are processing an investigative consumer report. An investigative Consumer Report is defined as a report containing information that was obtained via interview, e.g., employment performance review or professional/personal reference.

3. Carefully review the consumer report especially if the report contains adverse information. Ensure that criminal record information is reviewed taking into consideration the relevance with the position hiring for, the age of the record, the maturity level of the applicant at the time of the offense, and the length of time the applicant has been working in a similar position without re-offending.

4. Prior to making an adverse hiring decision based on a consumer report, employers are required to provide the applicant a pre-adverse communication explaining the consumer report process along with a copy of their report to give them an opportunity to dispute any erroneous information. A-Check’s new pre-adverse letter is designed to consider EEOC recommended evaluation guidelines and can be found by accessing this link:

Pre-Adverse Communication Letter – New 11-2014 (MS Word)

5. Lastly, the FCRA requires a final adverse communication be sent to the applicant after a “reasonable” period of time has passed since providing the pre-adverse communication stating the decision is final.

If your process doesn’t look like this or your documents do not meet the rules of construction, your organization could be subject to scrutiny by either a class action law firm, the Federal Trade Commission, or the EEOC.

But as A-Check always recommends to everyone, take the consumer test yourself. We are all consumers and have all had the experience of seeking employment at one time or another. As an individual, wouldn’t you want all of these rights if you were being evaluated by a consumer report?

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