News & Insights

Tips for Minimizing FCRA Risks*
June 5, 2015
by Robert Conte

 

South Bend / Mishawka, IN – The Fair Credit Reporting Act (FCRA) requires employers that use “consumer reports”, a report that covers any communication from a consumer reporting agency that addresses a person’s credit standing, character or reputation and is expected to be used to determine employment eligibility for applicants or current employers, to provide those employees or applicants with a clear and conspicuous disclosure, and obtain their written permission before obtaining the reports.

Keep the Disclosure Statement Separate

According to the FCRA, the disclosure must be “in a document that consists solely of the disclosure”. This means employers cannot add anything extra in the notice. To do otherwise could create a situation with potential expensive consequences. Since the disclosure is sent to anyone who had a background check performed, the extra language may create a liability risk.

Best advice: Use separate forms for the written authorization to perform the background check and the disclosure document.

Do Not Full Rely on Vendors

It is acceptable and likely normal for a company to use a third-party to outsource the background check process. However, to do so without a very favorable indemnification agreement in place is a mistake. Remember, it will be the employer not the third-party vendor who will be liable for the consequences of a FCRA violation.

Consider a Privileged Audit

It is considered a wise practice to have your FCRA policy and procedure (forms and notices) audited periodically by a lawyer (privileged audit) to make sure you are satisfying regulatory compliance requirements.

Proceed with Caution when Taking Adverse Action

The FCRA also requires employers to provide notice to an employee or applicant before taking adverse action based on a background check report, including providing a copy of the relevant report and a summary of rights. Do not forget to allow the individual a reasonable period of time (at least five business days) to dispute the report. Also remember to provide a separate notice to the employee or applicant if an adverse action is actually taken.

Best advice: Do not proceed with the adverse action until you have actually waited the reasonable period of time stated in the pre-adverse action notice.

Train and Retrain

The FCRA is a law with very specific technical requirements. Make sure you understand those requirements and explain them thoroughly to your employees who are responsible for compliance.

*Source: 5 Tips for Employers Worried about FCRA Class Actions, Law 360, 5/21/15

 

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