Adverse Action: Two-Step Process by the FCRA

(Last Updated On: June 14, 2018)

employment background checks

Employers who conduct employment background checks, also known as consumer reports, as part of the employment process, which includes hiring, promotion, and retention, must comply with Federal law requirements under section 604 of the Fair Credit Reporting Act (FCRA).

Before rejecting a job applicant, denying a promotion or terminating an employee based in whole or in part on information obtained in an employment background check, companies are obligated under the FCRA to follow a two-step process. This process provides applicants/employees the opportunity to review and dispute information in the report if they so choose.

Pre-Adverse Action

Companies must provide to the applicant/employee the following in advance of a decision, either in writing, in person or electronically:

a) A copy of the consumer report that was obtained and relied upon to make the decision.

b) A copy of A Summary Of Your Rights Under The Fair Credit Reporting Act

c) The name, address and phone number of the background check company that provided the screening report.

Adverse Action

If the decision is made to proceed with an adverse action, based on information in a consumer report, you must advise of your intent to not hire, not promote or terminate the candidate/employee. The following must be provided either in writing, in person or electronically:

a) The name, address and phone number of the background check company that provided the screening report.

b) A copy of the consumer report you obtained and relied upon to make your decision.

c) A copy of A Summary Of Your Rights Under The Fair Credit Reporting Act

Providing candidates/employees with a speedy notification allows the consumer reporting agency, (CRA), to respond to disputes and correct errors that may appear in the screening reports. Working closely with your pre-employment screening company when a dispute is under investigation will help to expedite the investigation.

Further information

For more information about additional rights, visit the Consumer Financial Protection Bureau website.

Learn more about the Consumer Reports Section 604 (b) of the FCRA document.

Compliance failure by a user of pre-employment screening reports may place that user’s company in violation of federal law and at risk for legal action at the federal level.

 

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