What Does FCRA Compliance Require for Employers?

What Is the FCRA?

The Fair Credit Reporting Act (FCRA) is a federal law that governs how consumer reporting agencies collect and use personal information — including background check reports. For employers, it creates specific legal obligations before you can use a background check to make a hiring decision.

Violating the FCRA exposes employers to lawsuits, regulatory penalties, and class action liability. Understanding these requirements isn't optional.

Before You Order a Background Check

1. Get Written Authorization

You must provide the candidate with a clear, standalone disclosure that you intend to obtain a consumer report. This disclosure cannot be buried in an employment application — it must be a separate document. The candidate must then provide written authorization before you can proceed.

2. Certify Your Permissible Purpose

When you order a report from a consumer reporting agency, you must certify that you have a lawful reason (permissible purpose) for the check — typically employment purposes — and that you will comply with the FCRA.

Before Taking Adverse Action

This is where many employers make costly mistakes. If you decide not to hire, promote, or retain someone based on information in their background report, you must follow a specific two-step process before the decision is final.

Step 1: Pre-Adverse Action Notice

Before taking any adverse action, you must send the candidate:

• A copy of the background check report
• A copy of the FTC's summary of rights document ("A Summary of Your Rights Under the Fair Credit Reporting Act")
• A notice that you are considering not hiring them based on the report

You must then wait a reasonable amount of time — typically interpreted as at least 5 business days — to allow the candidate to dispute any inaccuracies.

Step 2: Final Adverse Action Notice

If you proceed with the decision after the waiting period, you must send a final adverse action notice that includes:

• The name, address, and phone number of the consumer reporting agency
• A statement that the CRA did not make the decision and cannot explain why
• A notice of the candidate's right to dispute the accuracy of the report
• A notice of the candidate's right to a free copy of the report within 60 days

Recordkeeping

Maintain documentation of your FCRA compliance process for each candidate — authorizations, pre-adverse and adverse action notices, and the reports themselves. In the event of a dispute or audit, this documentation is essential.

State Laws Add Additional Requirements

Many states have their own background screening laws that impose requirements beyond the FCRA — including limitations on what can be considered, additional waiting periods, and more extensive notice requirements. Pennsylvania, New Jersey, New York, and California all have notable state-specific rules.

Working With a Compliant Screening Partner

At Do It Right Screening, our process is built around FCRA compliance from the first authorization form to the final adverse action package. We provide the required disclosure and authorization documents, and we can assist with the adverse action process if needed.

If you're not confident your current screening process meets FCRA requirements, contact us for a free compliance review.