How Your Company Can Avoid a FCRA Violation Lawsuit

How Your Company Can Avoid a FCRA Violation Lawsuit

Between 2009 and 2018, the number of FCRA lawsuits increased by 100%.

Although there's been a slight decline since then, an FCRA violation is nothing to take lightly. One offense can quickly escalate into a class-action lawsuit. For example, Publix supermarkets had to pay $6.8 million to employees for FRCA violations.

Don't let your company become next on the list. Keep reading to learn how to ensure FCRA compliance in all your dealings with employees.

Ensure You Have a Permissible Purpose

It's easy to run a background check or credit check on a potential employee, but that doesn't mean you have an automatic right to do so. Before you can request sensitive information about someone, you must show that you have a permissible purpose to access the data.

This includes:

  • Requesting a loan or line of credit
  • Seeking employment or consideration for a promotion
  • The underwriting process
  • Valuation or risk assessment
  • Applying for a government license

There may be other valid reasons to pull credit too. If you have any doubts, always confirm FRCA compliance before you take any action. Otherwise, you could be hit with a fine or lawsuit.

Offer a Full Disclosure

Under FCRA guidelines, employers must offer full disclosure in written form. The disclosure must clearly state that you plan to order a consumer report and use that information to make decisions about hiring the individual.

Note that this disclosure cannot be verbal or implied, nor can you bury it somewhere in the job application. It must be a written, standalone document that clearly states the purpose of requesting the information. You may also include brief additional details, such as a description of consumer reports or credit bureaus.

Along with this disclosure, you'll want to get signed consent from the applicant. Make sure to clearly state that their signature authorizes you (the employer) to conduct a background check or pull a credit report (or both).

Be Transparent With Adverse Action

Based on what you find in the consumer report, you may decide not to hire the applicant. If the person is already an employee, you could use this information to deny a promotion or fire the individual.

Whatever the case, if you're going to take any type of "adverse" action based on the consumer report, you need to communicate this clearly. The individual should receive a copy of the report along with a pre-adverse action notice. After a waiting period, usually five business days, you can issue a final adverse action notice.

What's the purpose of these steps? Under the FCRA, the individual has the right to dispute the details found in the report. If there are any inaccuracies, they may request that you order a new report within 30-60 days.

Avoid a Costly FCRA Violation

The last thing your business needs is an FCRA violation. Follow the steps outlined above to ensure you're in full FCRA compliance.

Of course, this might be easier said than done. That's why FCRA compliance services like ComplyTraq are here to help. From credentialing to site inspections, we'll make sure you're doing everything possible to avoid a violation or lawsuit.

Click here to learn more about our products and services and what we can do for your business.

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