When is an employment background screening company a “consumer reporting agency”?
Background screening reports are “consumer reports” under the FCRA when they serve as a factor in determining a person’s eligibility for employment, credit, insurance, housing, or other purposes and they include information “bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.” Companies that sell or provide those reports are “consumer reporting agencies” under the FCRA. So even if you don’t think of your company as a consumer reporting agency, it may be one if it provides information about people to employers for use in hiring or other employment decisions.
If your employment background screening company is a consumer reporting agency under the FCRA, what does the law require you to do?
Follow reasonable procedures to assure accuracy. Among other things, the FCRA requires you to establish and follow “reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” Certain practices may be indicators that a background screening company isn’t following reasonable procedures. For example, if a report lists criminal convictions for people other than the applicant or employee – for instance, a person with a middle name or date of birth different from the applicant’s – that raises FCRA compliance concerns. Other indications that a company’s procedures might not be reasonable include screening reports with multiple entries for the same offense or that list criminal records that have been expunged or otherwise sealed.
Get certifications from your clients. Consumer reporting agencies may provide consumer reports only to those with a specific permissible purpose, like employment. So verify that your clients are legitimate and get them to certify that they will use the reports only for employment purposes. In addition, the FCRA gives job applicants and employees the right to know that information about them is being reported to employers or potential employers. Therefore, you must get certifications from your clients attesting that:
- The employer notified the applicant and got the applicant’s written permission to get a background report;
- The employer will comply with the FCRA’s requirements; and
- The employer won’t discriminate against the applicant or employee, or otherwise misuse the information in violation of federal or state equal opportunity laws or regulations.
Provide your clients with information about the FCRA. The FCRA requires you to provide your clients with information about their responsibilities under the statute (Notice to Users of Consumer Reports) and a summary of consumer rights under the FCRA (A Summary of Your Rights Under the Fair Credit Reporting Act), which you can provide with the background screening report or before providing a report. These are standard documents available from the Consumer Financial Protection Bureau.
Honor the rights of applicants and employees. The FCRA gives consumers certain rights with which you must comply. For example, you must give them access to their files when they ask for them, conduct a reasonable investigation when they dispute the accuracy of information, and give them written notice of the results of investigations. It’s a violation of the FCRA not to respond in a timely way to consumers’ inquiries and disputes. Another FCRA violation: creating unreasonable obstacles for consumers trying to exercise their rights under the FCRA.
What if background screening reports include public record information?
The FCRA has special provisions if reports contain public record information – for example, courthouse records – and are used for employment purposes. If you include public record information in the reports you provide for employment purposes, the law gives you two choices: 1) Notify the person who is the subject of the report when public record information is being reported; or 2) Maintain what the FCRA calls “strict procedures” designed to ensure that reported public record data is complete and up to date.
Where can I find citations to relevant portions of the Fair Credit Reporting Act?
Here are cites to some of the provisions mentioned in this publication.
| CITATION | FCRA SECTION | FAIR CREDIT REPORTING ACT PROVISION |
|---|---|---|
| 15 U.S.C. § 1681a(d) | Section 603 | definition of a “consumer report” |
| 15 U.S.C. § 1681a(h) | Section 603 | definition of “employment purposes” |
| 15 U.S.C. § 1681b(a)(3)(B) | Section 604 | permissible purpose for consumer reports |
| 15 U.S.C. § 1681b(b)(1)(a) | Section 604 | certifications from employers as a condition of furnishing and using consumer reports for employment purposes |
| 15 U.S.C. § 1681b(b)(1)(B) | Section 604 | provision of summary of consumer rights to employers as a condition of furnishing and using consumer reports for employment purposes |
| 15 U.S.C. § 1681b(b)(2) | Section 604 | required disclosures before employers can get an applicant’s or employee’s consumer report |
| 15 U.S.C. § 1681c | Section 605 | information excluded from consumer reports |
| 15 U.S.C. § 1681e(a) | Section 607 | required user identity verification and permissible purpose certification |
| 15 U.S.C. § 1681e(b) | Section 607 | consumer reporting agencies’ obligation to follow reasonable procedures to assure maximum possible accuracy of information |
| 15 U.S.C. § 1681e(d) | Section 607 | required notice of user responsibilities |
| 15 U.S.C. § 1681g(a) | Section 609 | consumer reporting agencies’ obligation to disclose to consumers all information in their file |
| 15 U.S.C. § 1681g(c)(2) | Section 609 | consumer reporting agencies’ obligation to provide consumers with a summary of rights |
| 15 U.S.C. § 1681h | Section 610 | form of disclosure to consumers of their file |
| 15 U.S.C. § 1681i | Section 611 | consumers’ right to challenge information they believe is inaccurate and consumer reporting agencies’ obligation to reinvestigate |
| 15 U.S.C. § 1681j | Section 612 | charges for disclosures to consumers of information in their files |
| 15 U.S.C. § 1681k | Section 613 | requirements when reports include public record information used for employment purposes, including “strict procedures” to follow to ensure information is complete and up to date |
Resources for Business
To find out more about federal laws relating to background reports, visit www.business.ftc.gov, or call the FTC toll-free, 1-877-FTC-HELP (1-877382-4357); TTY: 1-866-653-4261.
For specific information on employment background reports, read:
- Background Checks: What Employers Need to Know (a joint publication of the FTC and the Equal Employment Opportunity Commission)
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