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Fair Credit Reporting Act: Illegal Employment Background Checks

Fair Credit Reporting Act: Illegal Employment Background ChecksThe Fair Credit Reporting Act (FCRA) protects consumers when it comes to their credit history and other aspects of their background. It does this by regulating the actions of consumer reporting agencies, which are the companies that produce credit reports (Equifax, TransUnion, Experian). The FCRA also regulates how those reports can be used by those who request them.

One way in which this law might affect you is when your employer, or a potential employer, does an employment background check on you. The reports obtained, often through a third party, include credit reports as well as criminal records. As a job applicant or employee, you count as a "consumer" under the FCRA. And the restrictions and requirements within the law apply to employers who access background reports for employment purposes.

The law says that an employer may not take adverse action (termination, demotion, etc.) based on a credit report of an employee or potential employee without following certain steps. Here is what you should expect:

  1. Before a report is accessed: An employer can't even obtain a credit report for employment purposes without letting the subject of the report know and getting their written authorization. The disclosure can’t be in the fine print of a job application. It must be "clear and conspicuous" and in writing. The job applicant or employee must then sign something specifically authorizing the employer to obtain a credit report.
  2. If an employer plans to take adverse action: If after the report is received, an employer plans to take adverse action against an employee, such as termination, demotion or rejection of a job application, they must first tell the employee or potential employee. This notification must include a copy of the credit report at issue and a description, in writing, of the consumer/employee’s rights under the FCRA. The employer also must give the employee a chance to dispute the accuracy of the report.
  3. If adverse action is taken: If an employer takes adverse action based on consumer report, they must give notice to the person affected, whether it's a job applicant or an existing employee. This notice must include, among other things, notification that you are allowed to dispute the accuracy of the report with the reporting agency.

If these steps aren’t followed, then you have the right to take legal action against the employer. If this has happened to you, or you suspect your employer might be breaking the law in this area, contact us for a free consultation about your rights and options. All calls are confidential.