HR Management & Compliance, Learning & Development

FCRA and Background Checks: Common Employer Questions and Best Practices

When considering a job applicant, you’ll likely want to investigate the person’s work history, education, criminal record, financial past, and medical information. The Federal Trade Commission (FTC) regulates such background checks (or “consumer reports”) through the Fair Credit Reporting Act (FCRA), a lengthy, complex set of laws that can be quite daunting to employers. Here are some common FCRA issues and best practices.

Notice to Applicant, Consent to Obtain Information

You must complete three steps before obtaining an applicant’s consumer report. First, let the individual know you may use the consumer report for employment-related decisions. The notice must be in writing in a standalone document (i.e., a separate written disclosure rather than buried in an employment application) with clear and visible language.

Second, obtain the applicant’s consent in writing to gain access to the consumer report. The consent section can be included on the document containing the notice provision mentioned in the first step above. According to the FTC, if an applicant declines to provide permission, you may reject the application.

Third, certify to the consumer reporting agency that you (1) have properly notified the applicant and obtained consent to access the consumer report, (2) will comply with the FCRA’s conditions on using the information for adverse actions, if applicable, and (3) won’t use it to violate any federal or state equal employment opportunity law or regulation.

Negative Information Found in Consumer Report

Suppose you discover information in a consumer report that could disqualify the job applicant. Before making a final decision or taking any action, you must send a copy of the report and the FCRA’s summary of consumer rights to the individual so she will know how to contact the consumer reporting agency.

The applicant then has the opportunity to review the report and correct any mistakes with the consumer reporting agency before a final employment decision is made.

Decision Not to Hire Applicant Based on Consumer Report

If you decide not to hire the applicant based on details revealed by the consumer report, you must provide certain information to the person within three business days. The notification can be made orally, electronically, or in writing and must contain:

  • Notice that the employment decision has been made based in whole or in part on a consumer report received from a consumer reporting agency;
  • Name, address, and phone number for the particular agency;
  • Statement clarifying the consumer reporting agency didn’t make the decision to pass on hiring the applicant and isn’t aware of your reasoning; and
  • Statement declaring the applicant has the right to dispute the accuracy and completeness of any information in the report and can get an additional free report from the consumer reporting agency by submitting a request within 60 days of your decision.

Practical Tips

Apply background check policy equally to all applicants. When conducting background checks, your company must comply with not only the FCRA but also all federal and state antidiscrimination laws. It’s illegal to check applicants’ and employees’ backgrounds if the decision is based on a person’s race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age (40 or older). In addition, you should apply the same standards to everyone when evaluating the information gained from the background checks.

Securely dispose of all background reports. You should burn, pulverize, or shred paper documents and dispose of electronic information so it can’t be read or reconstructed.

Wait a few days before making final decision. While the FCRA doesn’t explicitly say so, courts and FTC guidance suggest five days is a reasonable period to wait after notifying applicants about the discovery of information that may disqualify them from employment and before making the final decision.

Review state, local background check laws. Be sure to check the laws in the states where your company hires and employs people. Some states limit the weight you can give to certain criminal records in the hiring process. For example, California doesn’t allow employers to consider or seek details about certain types of criminal records, including an arrest or a detention that didn’t result in a conviction.

Provide clear, separate notice. Be sure the notice to the applicant is a standalone written document. Don’t simply include it as part of the job application. Make the language as clear as possible.

Final Words

Although the best practices listed above are directed toward FCRA compliance upon hiring an employee, you can apply the same provisions to current employees and retention decisions. Work with your employment lawyer to delve into additional questions about the Act and employee background checks.

Colleen Anderson Hartley is an attorney with Dentons Davis Brown in Des Moines, Iowa. You can reach her at

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