Fair Credit Reporting Act Overview

The Fair Credit Reporting Act (FCRA) is a Consumer protection law that governs Background Checks prepared by Consumer Reporting Agencies (CRAs) and the Organizations that obtain and use Background Checks. The FCRA places several responsibilities on Organizations related to their requests for, receipt of, and use of Background Checks. If a party does not abide by the FCRA (and/or similar state laws), a party faces risk of a lawsuit and other potential penalties. 

PERMISSIBLE PURPOSE

Section 604 of the FCRA requires that an Organization have a Permissible Purpose to obtain a Background Check. The list of permissible purposes for which an Organization can obtain a Background Check includes, among others: (1) for employment purposes when the Consumer has given written permission, and (2) at the written instruction of the Consumer. Background Checks should only be ordered and used for the permissible purpose that the Organization has identified in the Member Service Agreement.

DISCLOSURE AND AUTHORIZATION REQUIREMENTS 

Before conducting Background Checks, an Organization requesting a Background Check from a Background Check company (like Abuse Prevention Systems) must provide a Disclosure to the subject of the Background Check (i.e., ‘the Consumer’). A Disclosure typically informs the Consumer that Abuse Prevention Systems will conduct a Background Check (i.e., volunteer or employment position), and lists the types of searches that may be performed. In some jurisdictions, multiple Disclosures must be provided to the Consumer. Note also that there are specific legal requirements governing the content and formatting of the disclosures under the FCRA and various state and local laws. 

In addition to receiving the required disclosure(s), the Consumer must give written permission for the Organization to receive a Background Check. 

CERTIFICATIONS

Every time you order, view, and/or take action on a Background Check, you must certify: 

• that you will comply with all Federal, State, and Local law;
• that you have a Permissible Purpose to obtain the Background Check;
• that you have provided an appropriate Disclosure to the Applicant regarding the Background Check;
• that you have obtained the Applicant’s written Authorization for the Background Check; and
• that you will follow the legally-required Adverse Action Process, when appropriate. 

Note: If an order is placed using the QuickApp process, the QuickApp system will send the Disclosure, Authorization, and other related paperwork to the Consumer for electronic signature on your Organization’s behalf before the Background Check is prepared. The QuickApp system will only permit a Background Check to be prepared if the Applicant signs the necessary paperwork.

ADVERSE ACTION

When information provided in a Background Check will negatively affect a Consumer’s employment, potential employment, status as a volunteer, or status as a contractor, your Organization must take certain steps both before and after you make a decision before making a final decision. Examples of negative impacts (i.e., Adverse Actions) on a Consumer could include, but are not limited to:

• Denial of employment;
• Allowing a volunteer to serve in one area but not in another; or
• Not allowing a promotion due to a record; 

Under the FCRA, an Organization that wishes to take Adverse Action against an applicant, employee, volunteer, or contractor, generally must follow three steps:

1. The Organization must provide a Pre-Adverse Action notice informing the Consumer that the Organization may take Adverse Action against them based in whole or in part on their Background Check. As part of this correspondence, the Organization must also provide a federal governmental notice entitled ‘A Summary of your Rights Under the Fair Credit Reporting Act’ and a copy of the Background Check in question;
2. The Organization must wait a ‘reasonable’ amount of time to determine whether the Consumer disputes the accuracy of their Background Check. Most often, five business days is considered ‘reasonable.’ However, this should be evaluated on a case-by-case basis in accordance with applicable law. If the Consumer disputes the accuracy of the report, the Organization should wait for Abuse Prevention Systems to resolve the dispute before deciding whether to proceed with Adverse Action.
3. If the Organization decides to proceed with Adverse Action, the Organization must provide the Consumer an Adverse Action notice informing them of the Adverse Action as well as certain rights that they have under applicable law.

Click here or visit our Help Center to read more about your Organization’s obligations under this law. Please note that various states and municipalities have laws that may contain additional requirements related to the Adverse Action Process.

THE DISPUTE PROCESS

Consumers have the right to dispute any inaccurate or incomplete information in their Background Check. If a Consumer informs your Organization that there is an error or inaccuracy in the Background Check, please notify Abuse Prevention Systems immediately so we may process the dispute. Do not take Adverse Action during the pendency of Abuse Prevention Systems’ dispute reinvestigation. Once the dispute process is complete, Abuse Prevention Systems will alert you that the process is complete, and of any changes in the Background Check. After the process is complete, if your Organization wishes to take Adverse Action on behalf of the Organization, you may proceed with the Adverse Action Process in compliance with applicable law. Contact our Background Check Department for further information at [e-mail] or 817.373.7233.