The FCRA and the Most Critical Hiring Mistake A Company Can Make

You might think that hiring the wrong person is the most critical hiring mistake a company can make. It can result in poor quality work delivered to customers, dissatisfied clients, loss of reputation, internal theft, sexual harassment offenses, lawsuits and other problems…all things that can damage or destroy a company. So for any company that values its current and future business or the welfare of its employees and customers, background checks should be part of the Hiring Process. But many companies make one critical hiring mistake that could open the company up to potentially worse problems and lawsuits: they don’t hire an FCRA certified background check company to conduct the background check.

What is the FCRA?

The Fair Credit Reporting Act (FCRA) is a law that requires that Consumer Reporting Agencies (called CRAs)  use specific procedures to gather, consider and report on information on an individual. Generally speaking, the FCRA is designed to ensure that reports on consumers are accurate, fair and equitable to the individual with regards to their personal and private information, and to protect consumers when they have background information reported on them.

What Does the FCRA Have To Do With Hiring and Background Checks?

In 1970, when the FCRA was enacted, it covered credit reporting only, but it has since been expanded to also include reports concerning medical information, tenant screening, and employee background checks. The FCRA gives the individual certain rights including:

  • To deny consent for an Employment background check
  • To be notified when an Employment background check is done
  • To see the information gathered in an Employment background check
  • To fix any inaccuracies reported about their background check
  • To appeal adverse decisions made about them based on a background check

The FCRA also regulates the companies that collect this kind of information, as well as the organizations that use the information, and that’s where the problems can begin: If a company runs its own background checks, it must abide by both sets of these obligations, but it is unlikely that the company knows anything about either of them. That’s why hiring an FCRA certified background check company is the smart choice.

The FCRA Minefield

The FCRA is so deep and convoluted, business owners have been known to call it “ridiculous” and “a minefield”, especially by those who have been caught violating the Act. Whether those descriptions are fair or not does not dismiss the business from having to follow the regulations.

Some of the FCRA requirements (in more plain language than written in the official regulations) are…

Offers

An offer must have been made prior to conducting the pre-employment background check. This seems counterintuitive, since as an employer, you may not want to make an offer before knowing that the applicant passes a background check.

Authorizations

There are usually authorizations and acknowledgements regarding electronic signature, Summary of Rights, State Notices, City Notices, California Authorizations, background check, and others.

Not only are you required to receive the applicant’s authorizations before starting the background screening process, there are many rules about how you get those authorizations.

For example, you can’t put them all one a single sheet of paper (or electronic document) with a single signature: each authorization or acknowledgment must be separate and apart from any other, and require its own signature..

Disclosures

You must provide written disclosures to the applicant so that they understand the background check and review process.

Copies

You must provide a copy of the completed background check to the applicant if they request one.

Disclosure Windows

Certain kinds of reports are not allowed to look into the past for an indefinite period of time. For example, criminal records reports cannot go back more than 7 years. However, the rules of when that clock starts ticking are complex. In most cases, the clock doesn’t start when the crime happened, but from the date of the last disposition of the case.

Similarly, disclosures for bankruptcies have variable windows, usually based on the type of bankruptcy.

Accuracy

You must make sure that the results from the background screening are accurate and adhere to the regulations outlined in the FCRA.

FCRA “Adverse Actions” and 613a Notifications

The purpose of a background check is to ensure that an applicant is a good fit for your company. So, it is entirely possible for an applicant not to meet that standard for a number of reasons, including reasons like: 

  • The credentials and licenses claimed on the application are not accurate
  • Educational degrees are fraudulent
  • The discovery of excessive debt
  • Records of criminal histories
  • Records of poor driving records
  • Drug test results or records of substance abuse

…and more.

And if the applicant doesn’t meet the standards of your organization, you may not wish to hire the applicant. The decision not to hire someone is an “Adverse Action” and the FCRA lays out a number of requirements related to Adverse Actions, including the following:

1) Maintain “Strict Procedures” that ensures the information collected is accurate and up-to-date

2) The candidate must be notified in writing in a Pre-Adverse Action Letter detailing the potential adverse action and what negative information led to the decision. This letter must be sent within 3 days of the company receiving the background report and must contain a copy of their rights under the FCRA. The candidate must then be given a reasonable period of time — at least 5 days — to dispute the information found in the Pre-Adverse Action Letter.

3)  After those 5 days, a second notice must be sent, called an Adverse Action Letter, which is a notification that an adverse action has been taken.  The letter must detail that the adverse action was based on information found in the background check. It must contain contact information for the reporting agency, a statement that the reporting agency is not the party taking the adverse action, notice of the candidate’s right to obtain a second report free of charge from the reporting agency within 60 days and another notice of their rights under the FCRA.

And while all of this already sounds complex, there is much more to the Adverse Action process, which we explain fully to our clients. 

There are even rules about using the proper font size on disclosures and notices in the local regulations required by counties (for example, Los Angeles) and certain states. 

The FCRA’s requirements truly are a minefield for the employer.

The Most Critical Hiring Mistake A Company Can Make

We’ve only begun to scratch the surface of the FCRA and its requirements related to Pre-Employment Background Checks. So if it isn’t clear already, the most critical hiring mistake a company can make is to try to do background checks internally.

Instead, hire an FCRA certified background check company like Background Runner to run your background checks.

Why Background Runner?

Background Runner is certified by the FCRA. Our pre-employment background check service is fully compliant with all relevant federal and local laws and helps to insulate you and your company from needing to learn all the details of each law and how to implement them. 

We will provide you with all of the relevant forms and disclosures, perform all background checks using the latest technology and highest accuracy, and usher you through the entire process.

We do not make decisions on withdrawals or denials, but we provide to you the disclosures that include the right verbiage to keep you compliant.

There is no better, faster, or cost-effective way to run a pre-employment background check than Background Runner, your FCRA certified background check company. You have no idea how careful you need to be. We do. Avoid the risk. Call Background Runner at 800-322-2850 or get started here.