News Articles

Home / News & Events / News Articles / FCRA 101

FCRA 101

Posted in News Articles on 12/12/2012

There have been several stories in the news over the past year about background checks – some good and some not so good.  But did you know that while background screening companies are required to follow the Fair Credit Reporting Act (FCRA), companies who work with third party screening companies, such as BackTrack, are also required to follow the provisions of the FCRA?

What is the FCRA?
The FCRA is Federal legislation that became effective in 1971 and governs the collection, assembly and use of consumer report information.  There have been a couple of major amendments to it.  The most recent is the 2003 Fair and Accurate Credit Transaction Act (FACT Act). 

The FCRA sets forth rights and responsibilities for consumers (applicants/employees), users of consumer reports (our clients) and furnishers of consumer reports (BackTrack and our vendors).

The FCRA is overseen by two government agencies – the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB).  The FTC has an enforcement role, and the CFPB takes on the primary regulatory and interpretive roles of the FCRA.

What are my responsibilities under the FCRA?
Our clients have responsibilities under the FCRA, including having a permissible purpose to order a background check, providing certification that you have permissible purpose, and following adverse actions procedures if you chose not to hire/promote, disposing of records properly, among others. 

The full Notice of Users of Consumer Reports (for employers) can be accessed here.  This document was recently updated to reflect the CFPB’s oversight role and takes effect January 1, 2013.

Do I have a permissible purpose to obtain a background check?
If you are hiring someone to fill an open position with your company and have the applicant’s written consent to obtain the information from BackTrack, you do have a permissible purpose under the FCRA. 

One of the simplest ways to obtain the applicant’s consent is have your applicants fill out our release authorization and send it along with your application.

How do I provide certification to BackTrack that I have a permissible purpose?
Before we begin providing service to any client, an Agreement for Service needs to be signed by an authorized representative of your company.  The document states your permissible purpose – employment.  It only needs to be signed once to initialize your service with BackTrack, but it’s a good idea to read and familiarize yourself with it.

What are adverse action procedures?
In simplest terms – if you use BackTrack for employment screening and if you receive information in the report that would cause you not to hire/retain/promote an employee, you must notify the employee/potential employee. 

This is a two step procedure and both steps must be followed.  You must first send the applicant a Pre-Adverse Action letter that lets the applicant know that an adverse decision may be made and advises the applicant of his or her rights.  You must also provide the applicant with a copy of the report and the FCRA Summary of Rights. 

The applicant then has the right to contact BackTrack to dispute the information we provided to your company.  If this happens, we will notify your company of the dispute and provide both the applicant and you with an updated copy of the report with the re-investigation results.

After you provide the pre-adverse action letter and give the applicant a reasonable amount of time to file a dispute (typically 5-7 business days), you may move forward with your decision.  There is a second letter that must be sent to the applicant called an Adverse Action letter.

For more detail on the Adverse Action Procedures and letter that may be used, click here for our Adverse Action Guide for Employers.

For more information on the FCRA, contact BackTrack at 800-991-9694.
***This information contained here is intended to provide useful information on the topic covered,
but should not be construed as legal advice or legal opinion.**