The Fair Credit Reporting Act establishes rules and guidelines to protect consumers from the improper or unfair use of information about them contained in certain records. Initially, the FCRA was intended to curtail discriminatory practices around using individual credit reports for many kinds of decisions. Today, the FCRA continues to cover credit reports and other, more broadly defined “consumer reports.” This includes criminal background checks.
Most often, employers considering FCRA guidance concern themselves with issues such as standalone disclosure, gathering consent, and giving the correct adverse action notices. However, the law also defines a process that both employers and consumer reporting agencies must follow when a candidate disputes the results of a background check.
Disputes can happen for many reasons, but typically, they occur because a candidate believes that information reported in their check is inaccurate, outdated, or not a record associated with them. It is vital for everyone involved to follow the law in this area—but what is the law here?
Disputes happen during the adverse action process in which you notify a candidate of your intent to deny the position or opportunity based on their background check or credit report results. In doing so, you must provide a copy of the report and usually wait five business days for a response.
If a candidate does respond with claims or evidence that the report you’ve relied upon contains an inaccuracy, you must stop moving forward and keep the job position open. Review the new evidence and alert your background check provider of a dispute. By law, the consumer reporting agency must then follow FCRA compliance requirements to re-investigate the disputed claim.
If the agency cannot verify the information at the source or discovers a discrepancy, it must delete the information from the report. You will then receive a new report, which you must use as the basis of your decision-making process. You cannot continue considering the old, now-deleted information, per FCRA requirements.
Litigation is likely. In a recent case, a credit reporting agency that did not delete information from a candidate’s report faced a hefty lawsuit. A district court initially ruled against the individual, but both the Consumer Financial Protection Bureau and the Federal Trade Commission filed briefs demonstrating that the courts misunderstood and misapplied the FCRA. The lawsuit continues to wind through the courts. For employers and CRAs alike, failing to observe FCRA compliance can lead to years of costly court battles.
At backgroundchecks.com, we stay up to date on the latest FCRA-related developments on an ongoing basis. When we receive information about disputes, we conduct internal due diligence to verify records at the source. As required by law, if we cannot verify or confirm the accuracy of the record, we will delete it and re-issue the report, at which point you can continue with the hiring process as normal.
As an employer, it’s your duty to halt the hiring process when a candidate initiates a dispute and notify your background check provider of the issue. You must be ready to reconsider the results of an updated background check or the evidence a candidate provides. By carefully following the guidelines of the Fair Credit Reporting Act, you can be both fair and equitable during hiring while respecting the rights of candidates. Delays, mistakes, and errors happen—so know the process for making correct decisions during screening.