FAIR CREDIT REPORTING ACT (FCRA) COMPLIANCEOverview
As companies gather data about employees or prospective employees, it is crucial that they remain in compliance with the Federal Fair Credit Reporting Act (FCRA). Failure to do so can carry steep penalties and expose their businesses to law suits. Compliance is reasonably simple and InfoTrack supports its clients and the rights of individuals.
The Federal Government enacted the FCRA in 1970 and has since been refining law on behalf of protecting individuals from privacy infringement and reporting inaccuracies. The legislation clearly articulates the rights and obligations of Consumer Reporting Agencies, Users of Consumer Information, Furnishers of Consumer Information and Consumers. It is incumbent upon all of us to be compliant in policy and practice.
Under the legislation, individual rights are protected, yet we have legal means to access data we need to make smart hiring decisions. We simply need to follow the rules.
Before you begin acquiring confidential data, FCRA requires two critical steps:
- Consumer Reporting Agency (CRA) Certification: Before receiving any consumer reports, your organization must certify to the CRA in writing. This agreement simply confirms that you understand the obligations of your organization as a user of this data:
- Use only for employment purposes,
- Never use in violation of state or federal equal opportunity law,
- Always inform the individual in case the information is used for adverse actions (see next section) and
- Supply additional information legally required if engaging in Investigative Consumer Reporting.
- Pre-Adverse Action Notice: Before making an unfavorable employment decision, send a pre-adverse action disclosure. This is a preliminary notice to an applicant indicating information contained in their background screening report, if accurate, may cause denial of employment. Pre-adverse action disclosure can be issued orally, electronically or in writing. FTC Commentary recommends providing notification in writing so the employer has evidence they took reasonable steps to comply. A copy of the Federal Trade Commission's "Summary of Your Rights Under the FCRA" should be included. Summary of Rights Under the FCRA, Additionally, disclosures must include:
- Name, address and toll-free phone number of the consumer reporting agency who supplied the consumer report.
- A statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to give reasons why the employer is considering an adverse decision.
- A statement about the applicant's right to dispute the accuracy and/or completeness of the background screening results and the applicant's right to obtain a free background screening report from the consumer reporting agency upon request within 60 days.
- Adverse Action Notice: If, after sending the Pre-Adverse Action Notice, you reaffirm your intention not to extend an offer, you must issue a final letter notifying the applicant of your decision. While sending two letters may seem burdensome, the intention is to allow the applicant ample time to dispute the report. Not allowing enough time could be considered a violation of the applicant's rights.
- Give Applicants the notice and disclosure document.
- Obtain applicant's written authorization prior to obtaining a background check.
- Provide applicants with a copy of the FTC's "Summary of Applicant Rights Under the FCRA".
- Abide by Equal Employment Opportunity (EEO) hiring stipulations.
- Comply with EEOC stipulations for use of background screening reports. It is illegal for employers to enforce a blanket policy which denies employment to applicants with a previous criminal record.
- Comply with adverse action notification requirements.
A recent white paper from the Society for Human Resource Managers (SHRM), empirically shows that effective screening yields greater than 900% R.O.I., specifically from reduced turnover, theft and catastrophic events. Statistically, each unscreened new hire represents an average of $3,100 in preventable risk. With a well-designed and implemented screening program, that number plummets dramatically, according to the SHRM White Paper, 2010 GDS Publishing, LTD.) This analysis doesn't even attempt to include the impact a negligent hire suit can have on a company's reputation.
Here are a few additional tips for making the most of your Strategic Screening Program:
- Flawlessly adhere to your Background Screening Policy. Keep it simple and FCRA-compliant, then follow it with unwavering tenacity.
- Review your Employment Application to ensure that it clearly articulates that employment is contingent on applicant integrity throughout the interview process and on the results of detailed background checks.
- Choose your Screening Partner wisely. Just because every firm is leveraging the same data, doesn't mean you'll get the same results – not all screening services are equal. Make sure your Partner offers all of the following:
- Deep experience in the Industry of Background Screening.
- Superior customer service. Friendly and responsiveness are a given – your Partner needs to treat your Screening Strategy as their own. They are not merely providing reports – they are helping you protect your assets and make great hiring decisions.
- Systems, reports, processes and turn-around times that make them easy to work with. You are the customer, and you deserve to be treated that way at all times.
- Competitive pricing, but not jeopardizing the integrity and completeness required to mitigate your risk.
The full FCRA can be found here.