Dig Up the Dirt, but Know the Rules of the Game - The Fair Credit Reporting Act and Background Checks

by Davis Brown Law Firm

Employers like to know everything they can about applicants. Hiring employees is a big investment, and they want to do their due diligence up front so that their investment pays off. But before employers hire third-party companies to help them “dig up the dirt” about their prospective employees, they need to know the requirements and procedures of the Fair Credit Reporting Act (“FCRA”). 15 U.S.C. § 1681 et seq. Otherwise, that information comes with a price: increased exposure to liability (ranging from $100 to $2,500, plus punitive damages, courts costs, and attorney’s fees). 

Whenever an employer considers hiring a third-party company to investigate an applicant’s background, the information given to the employer – such as the applicant’s credit score, criminal history, or driving record – is called a “consumer report” and is regulated by the FCRA. The technical requirements of the FCRA can be broken down into three categories:

  1. Steps that must be taken before an employer gets a consumer report,
  2. Steps that must be taken before an employer decides not to hire an applicant based upon information in the consumer report, and
  3. Steps that must be taken after the employer decides not to hire an applicant based upon information in the consumer report.

Step One: Before an employer seeks out a consumer report, it must inform the applicant that it may use a consumer report in order to make its employment decision. This notice must be clear and conspicuous and in a stand-alone format; it cannot be in an employment application. The employer must also obtain the applicant’s written consent before it can get the consumer report. If the applicant refuses to give his or her consent, the employer can refuse to hire that individual. The employer must also inform the third-party company, who is providing the consumer report, that it has complied with the FCRA, will continue to comply with it, and it will not use the information in the consumer report for a discriminatory purpose. 

Step Two: If the employer decides it does not want to hire an applicant based upon information in the consumer report, that employer must provide a copy of the consumer report to the applicant along with a copy of a handout explaining the applicant’s rights under the FCRA (this handout should be given to the employer from the third-party company). The whole purpose of the FCRA is to protect applicants so that employers do not make unfavorable decisions based upon incomplete or inaccurate information. As a result, employers must wait a reasonable amount of time to let the applicant correct inaccuracies in their consumer report or to explain any discrepancies. 

Step Three: After employers have waited a reasonable amount of time, they can decide not to hire the applicant. The employer must inform the applicant that their decision was based upon information in their consumer report. The employer must also inform the applicant that they have a right to dispute the accuracy or completeness of the information and can request an additional free copy of the report within sixty days. The employer must also tell the applicant the name, address, and phone number of the third-party company that supplied the report, and it must explain that the third-party company did not make, or have anything to do with, the unfavorable employment decision. If the consumer report involves a credit report, additional detailed rules apply. Next, the employer must securely store and dispose of the consumer report to protect against unauthorized use of, and access to, that confidential information.

These steps should not deter employers from utilizing resources provided by third-party companies when conducting background checks on their prospective employees; but the exposure to liability under the FCRA should give employers an incentive to know the “rules of the game” before they seek out such information.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Davis Brown Law Firm | Attorney Advertising

Written by:

Davis Brown Law Firm

Davis Brown Law Firm on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.