United States: The FCRA: A Little Planning Could Shield Employers From A Lot Of Trouble

Awareness of The Fair Credit Reporting Act's ("FCRA") requirements is becoming increasingly important for employers. There has been a massive uptick in FCRA litigation in recent years—particularly class action suits alleging background check violations. This year alone, Wells Fargo, Uber, and Dish Network—to name a few—settled FCRA class action claims for $12 million, $7.5 million, and $3 million, respectively. Below we provide information about the FCRA and its state correlates, and recommend steps employers should take to ensure compliance with its intricacies.

The Law

The FCRA is a federal law governing how consumer reporting agencies ("CRAs") handle individuals' personal information. Aimed at protecting consumer privacy, the FCRA requires CRAs to ensure that information reported on consumers is fair, accurate, and private. Moreover, employers who request private information from CRAs must provide notice and obtain consent from the consumers for whom the information is sought.

When Does the FCRA Apply?

Employers must comply with the FCRA's requirements when using a "consumer report" or "investigative consumer report" for employment purposes.

  • Consumer reports include any communications of information prepared by a CRA that bears on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living that is used, expected to be used, or collected for establishing the consumer's eligibility for employment. Examples of consumer reports include credit reports and background reports.
  • Investigative consumer reports include information on a consumer's character, general reputation, personal characteristics, or mode of living obtained through personal interviews with neighbors, friends, or associates of the consumer.

Disclosure Requirements

If an employer intends to procure a consumer report for employment purposes, prior to doing so, the employer must provide a clear and conspicuous disclosure in writing to the employee or applicant in a stand-alone document stating that a consumer report may be obtained for employment purposes.

If an employer intends to procure an investigative consumer report for employment purposes, in addition to satisfying the requirement for obtaining a consumer report, the employer must also inform the employee or applicant in writing of: (a) the applicant or employee's right to obtain a copy of the report; (b) the permissible purpose of the report; and (c) the possibility that the disclosure may include information on the consumer's character, general reputation, personal characteristics, and mode of living.

Employee Consent Requirements

Employers must additionally obtain the applicant or employee's authorization in writing prior to procuring the report. The authorization form must include:

  • A statement of consent;
  • The applicant or employee's signature;
  • The applicant or employee's address; and
  • The applicant or employee's Social Security Number.

Remedies Under the FCRA

Under the FCRA, an employer who willfully fails to comply with any FCRA requirement with respect to a consumer is liable to that consumer for statutory damages between $100 and $1,000 and/or punitive damages. An employer who negligently fails to comply with any FCRA requirement is liable for actual damages. In the case of a successful action to enforce liability, the employer will also be liable for the costs of the action and reasonable attorney's fees.

Always Consider State Laws

Approximately half the states have FCRA-type provisions, which often impose more stringent requirements on employers than the FCRA.

California's Investigative Consumer Reporting Agencies Act ("ICRAA") is one such state law. The ICRAA applies only to investigative consumer reports. In accordance with the ICRAA, prior to procuring an investigative consumer report, California employers must make multiple disclosures to the applicant or employee, some of which overlap with disclosures mandated by the FCRA for such reports. The employer must inform the employee or applicant in writing of: (a) the applicant or employee's right to obtain a copy of the report; (b) the permissible purpose of the report; (c) the possibility that the disclosure may include information on the consumer's character, general reputation, personal characteristics, and mode of living; (d) the CRA's contact information; (e) the nature and scope of the investigation; and (f) the CRA's website address. Employers must also provide a check-box on their disclosure forms giving employees or applicants the right to obtain a free copy of the prepared investigative consumer report. Employers must additionally obtain the applicant or employee's authorization in writing prior to procuring the report.

Prior to Taking Adverse Action Against an Employee or Applicant

If an employer intends to take adverse action against an applicant or employee based on the contents of a consumer report, the employer must:

  • Provide the applicant or employee a copy of the consumer report and FCRA Summary of Rights.
  • Provide a reasonable opportunity to dispute the information in the report. The FTC advises that employers wait at least five business days after the applicant or employee receives the pre-adverse action letter before taking adverse action.
  • Ensure the applicant or employee actually received the pre-adverse action letter prior to taking any adverse action. We recommend sending notice via certified mail or with delivery confirmation.

After providing notice and a reasonable opportunity to contest the results of the consumer report, employers may take adverse action by providing written or verbal notice to the employee or applicant. The notice must inform the applicant or employee of the following:

  • The contact information of the CRA that supplied the report;
  • The CRA that provided the report did not make the decision to take the adverse action and as such cannot give the applicant or employee specific reasons for the action; and
  • The applicant or employee has the right to dispute the report's accuracy.

Final Thoughts

Now is a good time for employers to ensure they are complying with the FCRA, ICRAA, and any other state correlates that may apply. To avoid potential liability, we recommend employers take the following steps.

  • Provide proper disclosures when seeking consumer reports or investigative consumer reports;
  • Obtain written consent from employees or applicants prior to obtaining the report;
  • Follow the pre-adverse action steps; and
  • Provide written notice to employees or applicants after taking adverse employment action.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Wilson Elser Moskowitz Edelman & Dicker LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Wilson Elser Moskowitz Edelman & Dicker LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions