If you choose to conduct background checks on potential employees, you must follow strict guidelines laid out by the Fair Credit Reporting Act (FCRA). If you ignore these guidelines, you’ll open yourself up to lawsuits and stiff penalties.

At the beginning of a background check, the FCRA requires that employers disclose to applicants that they’re investigating their background. This disclosure should come as a form that applicants must sign. While applicant authorization is also recommended, it’s not currently required by the FCRA.

Learn more about FCRA requirements for background check disclosure.

Your second big responsibility under FCRA regulations comes if an adverse record is found. If the background check contains information that might keep you from hiring an applicant, you must provide the applicant with a:

• Letter advising that adverse action might be taken
• Copy of the background check report
• FCRA state of consumer’s rights document

This gives the candidate an opportunity to dispute any inaccuracies that may be part of that report.

When you decide that you’ll definitely take action based on the background check report that will adversely affect your candidate for employment, you must provide the candidate with a second letter that explains your actions are based on the results of the background check. This letter should include the name, address and telephone number of the consumer reporting agency that prepared the report. You also must provide a second copy of the consumer’s rights under the FCRA.

Since employers have a number of responsibilities under the FCRA, it’s in your best interest to read the document and discuss them with your lawyer.

Several states also have consumer reporting laws that may require additional steps. Contact a Corporate Screening background specialist for more information about specific state requirements.

Return to the Background Check FAQ page.