The importance of FCRA compliance

Hiring new employees is one of the most important and difficult responsibilities for any business. It is essential to find candidates who can excel in the position and become reliable, trustworthy team members.

To accomplish this, most companies send applicants through a multi-layered process: submitting a resume, attending interviews, filling out paperwork, and a pre-employment background screening.

Background screenings are among the most decisive factors in hiring. They provide a wealth of information that helps hiring managers decide whether a candidate will be offered employment.

There are several guidelines employers must follow when establishing a screening process, and hiring managers need to understand the legal requirements for screening any applicant.

• Employers must obtain background reports from an FCRA-compliant business.
• The FCRA, or Fair Credit Reporting Act, regulates the collection and use of consumer information.
• Only an FCRA-compliant business, also known as a consumer reporting agency, is legally allowed to provide data that helps employers make hiring decisions.
• Businesses that don’t use a compliant consumer reporting agency may be subject to legal action.
• If an applicant is turned down based on a background screen not conducted by a compliant business, that person has the right to sue the prospective employer.

Many companies turn to public records sites that promise information about “anyone in the United States.” What they may not realize is that a public records or people search website is not a consumer reporting agency.

Public records websites collect information from a variety of sources, such as magazine subscription cards and voter registration forms. They can be useful, but they are not legally obligated to keep their data current or accurate.

These sites post disclaimers stating that their information is for reference only. They cannot verify that it is correct, and it may not legally be used to make hiring decisions.

Consumer reporting agencies are legally bound to provide current and accurate information. They provide verified data about an individual’s work history, criminal records, drug testing, and other relevant details, and that information may be used to make hiring decisions.

Legal compliance is the other difference. Under the FCRA, applicants must agree to a background check and be informed in writing before a screening begins. If that doesn’t happen, the applicant can take legal action against the company that initiated the check.

Consumer reporting agencies manage these mandatory steps. Public records sites require no notice at all. They offer basic information such as address histories and possible criminal records, but don’t confirm that any of it is current, accurate, or even attributed to the right person.

Applicants have the right to refuse a background screening, and an employer will likely pass on that applicant. If the applicant agrees, the employer must follow every rule specified by the FCRA and enforced by the Federal Trade Commission (FTC).

Besides being notified about a screening, applicants must be told how to get a copy of their own background report. If a company decides not to hire someone based on the results, it must follow specific steps:

• The applicant receives a pre-adverse action disclosure, a copy of their consumer report, and the FTC document “A Summary of Your Rights Under the Fair Credit Reporting Act.”
• After the candidate is formally informed of an adverse action, such as being denied a job, they must also receive an adverse action notice.

Consumer reporting agencies like MacData Background Screening manage all of these steps. Companies that don’t use an FCRA-compliant business may face a lawsuit, and a successful plaintiff may also be entitled to court costs and legal fees.

Consumer reporting agencies are also obligated to keep up with state, federal, and industry regulations. Many states have their own laws on background screening for recruitment, and some industries, especially trucking, have unique guidelines.

An FCRA-compliant company knows these regulations and works with clients to stay compliant. Public records sites have no such obligation, so companies that use them for screening take on the risk and responsibility themselves.

Public records sites sell contact information and other basic details about individuals. They are not authorized to provide employment screening services.

FCRA-compliant businesses may legally provide pre-employment background checks. They are authorized to conduct drug screening, provide identity, criminal record, and verification reports, and offer related employment screening services.

Before you screen an applicant, make sure you’re working with an FCRA-compliant consumer reporting agency. Otherwise you may face lawsuits under regulations created to protect individuals’ privacy and to keep applicants from being denied work over inaccurate or outdated information.