Employer FCRA Requirements

Do you conduct background checks on job applicants before officially hiring them? If you do, are you in compliance with the Fair Credit Reporting Act (FCRA)? When getting started with background screening, some employers don't realize they are required to comply with the FCRA as part of this process.

"The Fair Credit Reporting Act is a law that imposes minimum standards on employers that they must follow when they are obtaining consumer reports." Sara Hutchins Jodka outlined in a recent BLR webinar. And consumer reports aren't just credit reports either. The FCRA requirement applies to any consumer report or investigative consumer report, even when supplied by a third-party vendor, typically a consumer reporting agency (CRA).

So, what is a consumer report? It is information used or expected to be used, or collected in whole or in part, for the purpose of serving as a factor in establishing the consumer's eligibility for employment purposes.

"Consumer reports are anything that is written, oral, or other communication from any consumer reporting agency bearing on a consumer's – or, in our speak, an applicant or employee's: credit worthiness or credit rating, credit standing or credit capacity, character, general reputation, personal characteristics, or mode of living." Jodka explained.

"That's pretty broad – especially that general reputation. General reputation is the one (and personal characteristics) . . . that kind of gets these background checks covered by the FCRA."

(An investigative consumer report means a consumer report, or portion thereof, in which information on a person's character, general reputation, personal characteristics or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer.)

Employer FCRA Requirements

The employer's requirements under the FCRA can be broken down into 4 components:

  1. Employer Certification to the Credit Reporting Agency (CRA)
  2. Disclosure to and Authorization from the Applicant
  3. Pre-Adverse Action Protocols
  4. Adverse Action Protocols

Component 1– Employer Certification to CRA.

The employer must inform the CRA that it:

  • Notified the individual clearly and conspicuously that a consumer report is being requested
  • Obtained written authorization from the individual allowing the employer to obtain a copy of the report
  • Will use the information for a "permissible purpose" only
  • Will comply with the conditions for adverse action if necessary
  • Will not use information from the consumer report in violation of any applicable Federal or State equal protection laws or regulations

Component 2 – Disclosure to and Authorization from the Applicant.

Disclosure must be in a stand-alone document, not added to an employment application. This means that the employer must notify the applicant clearly and conspicuously and in writing that a consumer report is being requested for employment purposes and that information contained in the report may be used in employment-related decisions.

Component 3 – Pre-Adverse Action Protocols.

Before taking an adverse action based in whole or in part on information in a consumer report, the employer must provide both a copy of the report and a copy of "Summary of Your Rights Under the Fair Credit Reporting Act" to the applicant. These must be provided in a "reasonable time period" before taking an adverse action.

Component 4 – Adverse Action Protocols.

The employer must provide the "Adverse Action Letter" that includes:

  • Name, address, and telephone number of the CRA that provided the report
  • A statement that the CRA did not make adverse decision and is unable to provide the applicant specific reasons why the adverse action was taken
  • A statement that the applicant has right to obtain a free copy of the consumer report from the CRA by making a request within 60 days
  • A statement that the applicant can dispute the accuracy or completeness of any information in the report with the CRA

For more information on employer requirements under the FCRA, order the webinar recording of "Conducting Legally Sound Background Checks: FCRA Requirements, EEOC Guidance, and Other Recent Developments." To register for a future webinar, visit

Attorney Sara Hutchins Jodka of Porter Wright has significant experience representing employers in all facets of employment-related litigation. Ms. Jodka has drafted company handbooks, workplace policies, and more.