What is the FCRA?
The Fair Credit Reporting Act (FCRA) is a federal law that promotes the accuracy, fairness, and privacy of information maintained by consumer reporting agencies. It establishes rules for how background checks may be used in employment decisions, protects consumers from inaccurate or incomplete information, and ensures they have important rights throughout the screening process.
FCRA: Key Requirements
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Permissible Purpose
Employers must have a legitimate, permissible purpose before obtaining a consumer report. Permissible purpose includes: evaluating a candidate for hiring, promotion, reassignment, or retention as an employee.
Standalone Disclosure
Employers must provide a clear, standalone written disclosure, in a document that consists solely of the disclosure, before a report is procured.
Written Authorization
Employers must obtain the applicant’s written authorization before procuring a report. It may appear on the same document as the disclosure or separately.
Pre-Adverse Action Notice
Before taking adverse action, employers must provide a copy of the report and a summary of rights, giving the applicant a reasonable opportunity to respond.
Dispute & Investigation Period
If an applicant disputes information in their report, the agency generally has 30 days to reinvestigate, extendable to 45. Employers should not take final adverse action while a dispute is pending.
Final Adverse Action Notice
If a final decision is made to deny employment based on the report, the applicant must be notified and told which agency supplied the report.
Recordkeeping & Accuracy
Consumer reporting agencies must follow reasonable procedures to assure maximum possible accuracy of the information they report.
Individualized Assessment
This is not a requirement of the FCRA itself. The EEOC has issued guidance under Title VII of the Civil Rights Act recommending that employers consider the nature of the offense, the time that has passed, and its relationship to the job before denying employment based on a criminal record. Several states have turned this guidance into an enforceable legal requirement.
FCRA: Key Restrictions
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Criminal Record Limits
FCRA sets no federal time limit on reporting convictions. Arrest records that did not result in conviction are limited to 7 years.
Reporting Restrictions
Most other adverse information, excluding convictions, generally cannot be reported if more than 7 years old.
Credit Report Restrictions
FCRA does not restrict which positions may consider credit history. It requires the same permissible purpose and written authorization as any consumer report. (States may add further restrictions.)
Bankruptcies
Bankruptcy records generally cannot be reported if more than 10 years old, measured from the date of the order for relief or adjudication.
Civil Judgments & Lawsuits
Civil suits and judgments generally cannot be reported if more than 7 years old, or until the governing statute of limitations expires, whichever is longer.
Tax Liens & Collections
Paid tax liens and accounts placed for collection generally cannot be reported if more than 7 years old.
Employer Requirements
The FCRA sets clear obligations for employers who use consumer reports.
Have a Permissible Purpose
Employers must have a legitimate, permissible purpose, such as evaluating a candidate for hiring, promotion, reassignment, or retention, before obtaining a consumer report.
Provide Clear, Standalone Written Disclosure
The disclosure must be in a document that consists solely of the disclosure, before a report is procured. It cannot be combined with an application, offer letter, or other materials.
Obtain Written Authorization
Written authorization from the applicant must be obtained before the report is procured. It may appear on the same document as the disclosure or separately.
Follow Pre-Adverse Action Requirements
Before denying employment based on a report, employers must provide a copy of the report and a summary of rights, giving the applicant a reasonable opportunity to respond.
Follow Timing Requirements
FCRA does not specify an exact number of days for the pre-adverse action waiting period, but courts and FTC guidance generally treat 5 business days as a reasonable minimum.
Provide Adverse Action Notices
If a final decision is made to deny employment, the applicant must receive notice, including which agency supplied the report.
Maintain Records
Employers should retain disclosure, authorization, and notice documentation to demonstrate compliance if a dispute or claim arises.
Ensure Accuracy and Compliance
Employers and the consumer reporting agencies they use must follow reasonable procedures to assure maximum possible accuracy of reported information.
Applicant Rights
Under the FCRA, applicants have important rights when employers obtain background checks from a third-party agency.
Written Disclosure
Before a background check is run, you must receive a clear, standalone written notice that a consumer report may be obtained for employment purposes.
Written Authorization
Your written authorization must be obtained before a report is procured. You have the right to know what you’re agreeing to before it happens.
Consumer Copy
You’re entitled to receive a copy of your background report if you request one, and automatically before adverse action is taken based on it.
Pre-Adverse Action Notice
Before you’re denied employment based on your report, you must be given advance notice and a reasonable opportunity to review and respond.
Right to Dispute
If information in your report is inaccurate or incomplete, you have the right to dispute it with the consumer reporting agency. They must investigate and respond within 30 days, extendable to 45 days if you submit additional supporting information.
Final Adverse Action Notice
If an employer ultimately denies you employment based on your report, you must be notified and told which agency supplied the report.
Access to Your File
You have the right to request and review the complete contents of your file held by a consumer reporting agency.
Summary of Rights
You must be provided a written summary of your rights under the FCRA whenever a background report is used in an employment decision.
Non-compliance can result in civil liability, statutory damages, and legal exposure under federal law.
Why the FCRA Is Important
Protects consumers by promoting fairness, accuracy, and privacy in background checks and credit reports Establishes rules for obtaining, using, and disposing of background reports during the hiring process Requires written disclosure and authorization before an employer obtains a consumer report for employment purposes Provides consumers the opportunity to dispute errors before inaccurate information negatively impacts employment decisions Creates national standards that apply across the U.S., while allowing states to impose additional protections
Download the FCRA Quick Reference Guide
A one-page summary of key FCRA rules and timelines.