Background Checks and the Fair Credit Reporting Act

A natural segue from our last post regarding conviction records is to briefly touch on background checks and the requirements of the Fair Credit Reporting Act (FCRA).  For the truly ambitious, the you can read the complete FCRA text.

Background checks are most commonly encountered during the hiring process. For that reason, we will focus on a scenario involving an employer and an applicant.

The Fair Credit Reporting Act’s requirements arise when an employer uses a third party credit reporting agency (CRA) to conduct background checks, also called consumer reports.  The most common contents of a consumer report include prior employment verifications, credit checks, conviction record checks, and driving record checks.

Before the employer can conduct a background check through the CRA, they must provide a “clear and conspicuous” notice to the applicant. This notice must be provided in writing, and receive signed authorization from the applicant. This means that the notice and authorization should be provided on its own, separate piece of paper.  The CRA also requires the employer to verify they provided notice and authorization to the applicant and and will continue to comply with the Fair Credit Reporting Act. The employer must also verify they will not discriminate against the applicant based on the report’s contents or otherwise misuse the information.

It’s important to note that if the employer intends to obtain consumer reports at certain intervals during the applicant’s period of employment, the notice and authorization should clearly state that as well.

If, upon reviewing the consumer report, the employer decides to take an adverse action, in this scenario not hire the applicant, the employer must first provide the applicant with notice of its intent to take an adverse action, a copy of the consumer report it reviewed in reaching that decision, and a copy of a document titled “Summary of Your Rights Under the Fair Credit Reporting Act.”  This gives the applicant an opportunity to review the report and object to any inaccuracies in the report, in an attempt to prevent the adverse action from happening.

After the adverse action is taken, here the rejection of the applicant, the employer must provide the applicant with:

  • A notice of the adverse action; the contact information (name, address, telephone number and web address) of the CRA that provided the report
  • A statement that the CRA did not make the decision to take the adverse action and cannot explain to the applicant why the adverse action was taken
  • A notice that the applicant has the right to dispute the information contained in the report
  • A notice that the applicant has the right to obtain a free copy of the report from the CRA for 60 days

A good idea would also be to highlight in the notice the web address for the “Facts for Consumers” provided by the Federal Trade Commission.

Once finished with using the consumer report, the employer must securely dispose of it. Usually this is accomplished by shredding it.  Other options include:

  • If you’re cold, burning the report(s)
  • If you’re angry, pulverizing the report(s)

*Important Note: It is becoming increasingly common for employers to simply “Google” applicants for positions, especially in small businesses. Background checks or consumer reports conducted in an informal manner such as this, without using the services of a third-party background check company, are not subject to the Fair Credit Reporting Act.

* Even More Important Note: Don’t forget to check what’s in your credit report every now and then.  You are entitled to a free report once a year, you should use  This is the official website that you should use to do a credit check.  Never use any other sites, such as

When’s the last time you requested your free credit report? Tell us!