A new FCRA class action lawsuit is offering more proof that improper background check procedures will land you in court… and could make you pay hefty settlement fees.

This time, a Missouri man is alleging a business he applied to violated the Fair Credit Reporting Act (FCRA) by not hiring him as an assistant manager based on information it received from a Consumer Reporting Agency (CRA). The problem is that the business and the CRA failed to follow proper FCRA law when obtaining the information and how it used it in making its hiring decision.

Court records show that the plaintiff says the business did not provide him with a copy of the report so he could not address any possible inaccuracies in the background check.

If true, that is a direct violation of FCRA law, and as we’ve seen before, does not bode well for the business in court.

Here is a recent sampling of headlines on ActiveCare that all feature FCRA violations:

Tough Time for Amazon – Two Lawsuits Filed for Alleged FCRA Violations

Lawyers Chomp on Chuck E. Cheese’s Class Action FCRA Lawsuit

Car Sharing Services Accused of Violating FCRA

As you can plainly tell, FCRA lawsuits span nearly every industry. Sometimes, it seems as if no one has a handle on how to properly comply with background check law.

An attorney’s perspective

A recent article in Legal News Line reports that David Anthony, an attorney at Troutman Sanders in Richmond, Va., who has extensive experience in this type FCRA litigation, says FCRA cases are filed on a daily basis across the country, and the trend has been increasing steadily.

“Settlements in certain types of FCRA cases have been fairly substantial in the recent years. In addition, the use of background checks during the employment on boarding process is almost a given for most employment opportunities, so the FCRA impacts employers of all shapes and sizes,” Anthony said.

Part of the improbable problem, says Anthony, is that the FCRA is “highly technical,” yet has “deceptively simple requirements.” These requirements trip up even the most well-known and well-respected employers to the tune of millions of dollars in lawsuit payouts.

Don’t be a victim 

More businesses are relying on background checks as a pre-employment hiring tool. That’s certainly a good thing. Some of these same businesses, however, aren’t relying on the advice of a nationally-accredited CRA (like Active Screening) or at least a solid employment law attorney. That’s bad.

Thinking you can navigate FCRA compliance law on your own is like trying to set sail during a Nor’easter. Chances are, you’re going to be up a creek without a paddle.

At Active Screening, we don’t just want our clients to be empowered with the proper working knowledge of FCRA law. We want all businesses that use background checks to know this stuff. It’s good for the businesses, and good for our industry.

Here’s some FCRA compliance basics you need to know:

Written Disclosure and Authorization Required

The FCRA requires any employer intending to run a consumer report to first disclose to applicants or employees that a consumer report may be obtained for employment purposes. This disclosure cannot be included in an employment application or other document that contains any extraneous information. The employer must also obtain an employee’s or applicant’s written consent before running the report.

Check out our list of downloadable disclosure and authorization forms here.

Reporting Requirements

Employers also must comply with specific reporting requirements. Before obtaining a consumer report from a consumer reporting agency, the employer must provide certification to the reporting agency that they are  requesting the report for employment purposes; have provided the required disclosure to the applicant; have obtained the necessary written consent to obtain the report; will provide the applicant with a copy of the report along with notifying them of their rights before taking any adverse action based in whole or in part on the results; and will not use the results from the report in a manner that violates federal or state equal opportunity laws.

Pre-adverse Action and Adverse Action Notices

If the employer plans to take any adverse action based in whole or in part based upon results obtained from a consumer report, the FCRA requires the employer to provide specific notifications to the applicant or employee.

An “adverse action” is either a denial of employment or any other decision that adversely affects any current or prospective employee. The FCRA requires employers to provide a copy of the consumer report results to the applicant or employee and additionally provide them with a copy of their rights under the FCRA (the “Summary of Rights Under the FCRA”) before taking adverse action based upon information contained in the consumer report.

When the employer takes adverse action, they must then provide the applicant or employee with the following information:

  • Name, address, and telephone number of the consumer reporting agency issuing the report
  • Statement that the consumer reporting agency was not the decision maker and can not explain why the adverse decision was made
  • Statement regarding the applicant or employee’s right to obtain a free disclosure of the report from the agency if the applicant or employee requests the report within 60 days of notice of the adverse action
  • Statement regarding the applicant or employee’s right to dispute directly with the consumer reporting agency the accuracy or completeness of any information provided by the agency.

Hopefully, this gives you a solid baseline from which to measure your current FCRA compliance protocols. But as always, if you have questions, please don’t hesitate to contact one of our knowledgeable and friendly team members at 800-319-5580.

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