Are Your Background Check Disclosures Compliant With the FCRA?

Class Action Lawsuit Filed Against Healthcare Provider Over Non-Compliant Background Check Disclosures and Authorizations
November 17, 2022

Employers that use a third-party vendor or consumer reporting agency to perform background checks on applicants or employees must comply with the Fair Credit Reporting Act (FCRA). They can do so by supplying the applicant or employee with the required written consumer report disclosure. If an employer does not comply with this requirement, they are putting themselves at risk of considerable liability.

Courts have seen a considerable uptick in FCRA actions since the Ninth Circuit Court of Appeals issued several decisions affecting FCRA actions. For example, the Ninth Circuit’s decisions clarified the requirements for compliant consumer report disclosures. In addition, the FCRa provisions that impose automatic penalties of $100-$1,000 per violation may have significantly increased lawsuits, not including the attorneys’ fees and possible punitive damages. There is also a statute of limitations of two years and a statute of repose of five years which puts companies with a high turnover rate at a higher risk of being sued.

Fortunately, companies can easily avoid these types of lawsuits by complying with the FCRA requirement to provide a consumer report disclosure. However, businesses must follow the requirements carefully. Companies must ensure that the disclosure form follows the requirements. Furthermore, they should review documents from background check vendors or consumer reporting agencies. This step is crucial because the company using the forms maintains all liability for failures to comply with the FCRA.

Businesses must inform the applicant or employee that they wish to request a report. This step is crucial for complying with the FCRA requirements for consumer report disclosures. Furthermore, the disclosure must be “clear and conspicuous,” and in a document consisting solely of the disclosure itself.

To be “clear and conspicuous,” disclosures must be readily understandable to a non-professional reader. Therefore, it cannot contain complicated jargon or phrasing. It must also be noticeable, which is to say not in a small font or hidden on the backside of another page.

The second requirement explains how the disclosure must not include irrelevant information. This requirement means no extraneous information beyond the minimum required to communicate the disclosure. However, there are limited exceptions to this rule.

The liability presented by non-compliant FCRA disclosures has grown in recent years. However, remaining compliant may prove easier by working with a trusted employment screening provider. The right provider will ensure compliance, stay up-to-date with the ever-shifting regulations, and ensure your company issues proper disclosures without hassle.

Pre-employ makes background checks easy and reliable. Speak with a compliance expert today.