Adverse Action

Fair Credit Reporting Act ( FCRA ) & CRA Information

If an employer decides not to hire a job applicant based in whole or in part on information contained in a background check report for employment purposes obtained from a Consumer Reporting Agency (CRA), that employer must go through the “adverse action” process mandated by the federal Fair Credit Reporting Act (FCRA). When taking an “adverse action” such as not hiring an applicant or firing an employee based on information in a consumer report obtained through a CRA, the FCRA has additional requirements under the FCRA that include a “pre-adverse action” notice and an “adverse action” notice.

Adverse Actions Requirements:

  • Before employers take an adverse employment action, they must give applicants or employees a “pre-adverse action” notice that includes a copy of the consumer report relied on to make the decision and a copy of A Summary of Your Rights Under the Fair Credit Reporting Act they should have received from CRAs compiling the report. By giving applicants or employees the notice in advance, they have an opportunity to review the report and explain any negative information.
  • After employers take an adverse employment action, the must tell the applicants or employees in an “adverse action” notice (orally, in writing, or electronically): that they were rejected because of information in the report; the name, address, and phone number of the company that sold the report; that the company selling the report didn’t make the hiring decision, and can’t give specific reasons for it; and that they have a right to dispute the accuracy or completeness of the report, and to get an additional free report from the reporting company within 60 days.
  • Employers must wait a “reasonable” amount of time between sending a “pre-adverse action” notice and an “adverse action” notice to give the subjects of the adverse action an opportunity to review the background report and explain any negative information. Just how long employers should wait before denying employment based upon information contained in a Consumer Report is not specified in the FCRA. However, an opinion letter from the FTC suggested a minimum period of five (5) business days would be reasonable period of time before making the final decision, although employers may consider a longer period of time just to be safe.

More information about the FCRA and background checks is available on the Resources page.


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