Avoid Legal Ramifications from Poorly Written FCRA Disclosures

Background check

The Fair Credit Reporting Act (FCRA) is a federal law that requires employers to make specific disclosures to employees or job applicants related to the information they will obtain and use during the hiring process, including a background check. FCRA regulations require employers to meet specific criteria in their disclosures. Chief among these requirements is that employers provide “clear and conspicuous” written notices that must be solely of the disclosure in nature. In essence, this requirement means that the disclosure must be very clear and must be a separate, standalone document.

Poorly written FCRA disclosures can violate the FCRA regulations because they would not meet the bar for being clear and conspicuous. Unfortunately, due to the interpretive nature of this guideline, there is room for many FCRA lawsuits, which can become costly and draining for employers. Plaintiffs may join a class-action lawsuit and seek damages for faulty disclosures. If the employer is found to have insufficient FCRA disclosures, the statutory damages often range between $100 and $1,000 per disclosure and background check obtained for each individual. If there are many plaintiffs, it is easy to see how this can quickly add up and become a severe liability for your company.

Attorneys often pursue FCRA violation cases because they are easy to win. Unlike many employer and employee cases, which have complex discovery periods that rely on one’s account more than the other, FCRA facts are easy to establish. Either the FCRA disclosure used by the employer meets the federal law requirements, or it does not. If the document is insufficient, this scenario quickly becomes a case that is very easy to win. In most instances, the plaintiffs do not even have to demonstrate that the violation resulted in actual harm to them, only that the violation occurred.

Because employers must meet the standard for FCRA compliance, many rely on templates or notices created by third parties, assuming that these documents will meet the criteria. Unfortunately, that is not always a safe assumption. These documents often do not meet the federal standard. Additionally, even if the employer adopts a document that does meet the standard, if they fail to update it to reflect recent changes or evolving standards, they can quickly become insufficient even if they were deemed sufficient in previous years. And unfortunately, case law related to FCRA violations demonstrates that even employers with good intentions may be liable for violations if they use these common documents.

Writing Strong FCRA Disclosures

The message from the federal law and subsequent court cases is clear; employers must develop and use very clear disclosures.

Some key tips or strategies for creating strong FCRA disclosures include:

  • Keep it separate. The FCRA law is very clear on this. The disclosures must be on a standalone document. You cannot simply add the verbiage to additional hiring or job information. It has to be separate and distinct so that applicants or others requiring background checks understand that they are giving consent to review all of the information outlined in your disclosure.
  • Do not add additional information. A recent court case found that it would be considered an FCRA violation if the employer combined the disclosures related to background checks with any other disclosures required by state law. The inclusion of additional disclosures is considered extraneous information and undermines the provision that it be clear and conspicuous. For this reason, employers should include only the FCRA disclosure on the standalone document, and additional state disclosures must be provided to the applicant in separate materials.
  • Obtain written consent. It is not sufficient to simply provide a document outlining the consumer reports or background checks that may be obtained; you must also obtain consent from the applicant or employee. Keeping this documentation is one way in which the employer can demonstrate that they are meeting FCRA requirements by providing information about what will be collected and how it will be used.
  • Be clear. This sounds simple, but many employers can get hung up and overthink this process. The FCRA disclosures should be straight to the point and easy for applicants or employees with any level of education to understand. While it’s tempting to think that adding additional information will provide additional protection, that’s not the case with FCRA compliance. The information must be clear and direct, not couched in a nest of legal language and additional information.

While this process sounds easy, it can be trickier than you think. If you have any doubt about your FCRA disclosure process, it may be beneficial to have a review done by professionals. To learn more about implementing strong FCRA disclosures and reducing your potential risk, contact USA Fact today.

USA Fact Global Screening Services provides comprehensive background and criminal checks for employers that comply with federal and local laws. By helping you eliminate high-risk applicants through tailored solutions, USAFact enables you to create a safe and productive work environment and a foundation for future success.