If you’ve been reading our blogs, you’ve seen us reference the Fair Credit Reporting Act (FCRA) exactly 1,328,923 times. Perhaps that’s an exaggeration, but there’s a reason why we talk about it so often.
Running afoul of the FCRA could expose you to significant liability, including statutory penalties and civil litigation. Depending on the size of your business, this could sink you.
According to the law, “end users” (that’s you) who order background checks from “consumer reporting agencies (CRAs)” (that’s Integras) have a number of responsibilities. They include, in part:
- Providing certification to the CRA that they are following all FCRA rules
- Telling the consumer/applicant that a background check is going to be conducted and obtaining authorization from them
- Indicating that they will comply with adverse action requirements when deciding not to hire, or to rescind an offer of employment, based on the background check report. This includes providing the consumer with a copy of the report and a statement of their rights, as well as other requirements.
Substantial Penalties for FCRA Violations
Not complying with the FCRA can subject your company to statutory damages of $100-$1,000 per violation. If, say, your HR department has inadvertently been missing an FCRA-mandated disclosure for many applicants, the potential fines can quickly add up.
Because the FCRA states that plaintiffs can also win punitive damages and recover attorney fees, these types of violations make appealing class-action targets.
And there are other potential penalties.
Consumer reporting agencies have additional requirements, such as certain reporting requirements, that CRAs must follow. One key rule is that, unless the consumer is making $75,000 or more per year, non-convictions filed more than seven years earlier cannot be reported.
If a CRA reports one of those older non-convictions and you make a negative hiring decision because of it, you could be in the embarrassing position of rescinding that decision or, worse, wind up tangled in a lawsuit.
Other Regulations May Apply
Keep in mind that the FCRA is not the only law governing background checks. States and counties may have additional regulations to follow. For example, in New York City, companies must follow:
- The Fair Chance Act, which mandates that employers not ask about an applicant’s criminal history, or even indicate that there will be a background check, before making an offer of employment. (There are other provisions within this act as well.)
- The Stop Credit Discrimination in Employment Act, which significantly limits occasions when companies can order credit checks on applicants.
As with federal laws, state and county regulations may carry significant penalties.
As you can see, it’s not enough to simply order a background check report and hope for the best. The penalties are real. We highly recommend consulting an attorney to ensure that your background check program is legally compliant. And while a CRA may not be able to provide legal advice, an experienced partner should be able to answer many questions and provide helpful information.
Thus ends our 1,328,924th reference to the FCRA. More, no doubt, to follow.
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