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What are my obligations under the FCRA and do you have a check list?


Under the Fair Credit Reporting Act (FCRA), employers must certify to the Consumer Reporting Agency (CRA) that they have complied with the applicable disclosure and authorization, and will comply with adverse action requirements as imposed by the FCRA. Further, employers must certify that the information will not be used in violation of any applicable Federal or State equal employment opportunity law or regulation.  


Disclosure and Authorization  

In terms of the disclosure and authorization requirements found in Section 604 of the FCRA, the employer cannot procure a consumer report for employment purposes unless a “clear and conspicuous disclosure has been made in writing to the consumer” before requesting the consumer report “in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes.” The consumer must also authorize in writing the procurement of the consumer report. 

The term “solely” is one word currently being exploited by plaintiffs’ attorneys who are aggressively pursuing class-action lawsuits against private employers. One recent $6.8 million settlement with a national grocery chain involved allegations that the employer’s inclusion of a waiver of liability in its disclosure language violated the “solely” requirement of the FCRA. Other cases have alleged the inclusion of criminal history questions or other extraneous information also violates the FCRA requirements. Thus, given the litigious nature of the disclosure and authorization requirements, consultation with qualified legal counsel is highly recommended.  

Employers may have additional disclosure and authorization requirements under applicable state laws.  

Adverse Action  

Another important obligation employers must comply with, when applicable, is the adverse action process. The adverse action process must be followed any time a decision is made in whole or in part based on information in a Consumer Report that adversely impacts an individual, such as denying employment, terminating an employee or deciding not to promote an individual.  

Adverse action is a two-step process which consists of a Pre-Adverse Action notice and an Adverse Action notice (or Final Adverse Action notice). The Pre-Adverse Action notice should be sent by the employer to the individual before an adverse employment decision is made. The notice should include a copy of the background report, a copy of the “A Summary of Your Rights Under the Fair Credit Reporting Act” and any additional state notice requirements.   

The letter should also specify the number of days the employer intends to wait before making a final decision. A common misconception is that the FCRA prescribes the amount of days an employer must wait. While the law itself is silent, the Federal Trade Commission has noted that the intent behind the adverse action process is to ensure an individual has a chance to dispute any inaccurate information on a background report before a final employment decision is made. Along that line, the FTC has previously opined that five business days is likely a reasonable time period. (See Advisory Opinion to Weisberg (06-27-97)). Regardless of how many days are specified, it is important the employer actually wait for that time period to elapse before sending the Final Adverse Action notice.  

There may be some local and state law requirements that further impact the adverse action process. 

If you would like to turn on the adverse action process on your account, please click here or scan the QR code on a phone or tablet to access the form.


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