Understanding the Fair Credit Reporting Act

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Fair Credit Reporting Act?

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Under the Fair Credit Reporting Act (FCRA), credit reporting and other investigative agencies may provide background financial and personal information to an employer about an employee or applicant for a permissible "employment purpose". A permissible employment purpose is the evaluation of an individual for employment, promotion or retention.

When employers hire a third party to conduct a background check, or obtain reports from outside agencies they are subject to the Fair Credit Reporting Act (FCRA). The FCRA distinguishes between two forms of reports, consumer reports and investigative consumer reports. A consumer report includes credit checks, overall indebtedness, addresses of record, etc. Investigative consumer reports provide in-depth information about an individual's character, general reputation, personal characteristics; mode of living, etc. Due to the more "intrusive" nature of investigative consumer reports, the Fair Credit Reporting Act requires employers who request this type of report to comply with additional notice and disclosure requirements.

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The HR Library has more helpful FCRA resources like these:

FCRA Changes

Fair Credit Reporting Act Regulations by State

Privacy vs. Your Need to Know

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