Employers that use investigators or agencies like Oxford Document Management (ODM) to conduct background checks on prospective or current paid employees are required to comply with the notice and disclosure requirements of the federal Fair Credit Reporting Act (FCRA). Though a strong argument can be made that the FCRA does not apply to churches or other religious organizations on the basis of the free exercise clause of the First Amendment of the U.S. Constitution, we recommend that you get an opinion from your legal counsel.

The FCRA regulates the collection, storage and sale of personal information including, but not limited to, criminal history records, driving records, worker's compensation reports, educational credentials, credit history checks and employer reference checks for employment-related and other purposes. Under the FCRA, background investigation reports that include this personal information are an "investigative consumer report" (hereafter referred to as "Report") and the organization that collects or assembles this information for the benefit of a third party for a fee is called a "consumer reporting agency" (i.e. ODM).

Please visit the Federal Trade Commission website for a complete text of the FCRA.

There are significant penalties for noncompliance with the FCRA. Under Section 617, if the FTC finds "negligent noncompliance" with FCRA requirements, violators are liable to an applicant or employee for actual damages, costs of a suit, and attorney's fees. In addition, an employer's "willful noncompliance," may result in fines of up to $1,000 per violation, as well as punitive damages. Criminal penalties also may be imposed if a person obtains a credit report under false pretenses, including fines and/or up to two years imprisonment.

Given the tremendous importance of this topic, we recommend that you print this material for your future reference. The extent to which you will deal directly with the notice and disclosure requirements of the FCRA will depend on the online features you choose.

ODM Makes Complying With the Fair Credit Report Act Simple

The steps required to comply with the FCRA are easily incorporated into our online screening process:

Employer-User Certification Required (FCRA Section 604)
Prior to obtaining an investigative consumer report from a consumer reporting agency, the employer must first provide certification to the consumer reporting agency that the employer:

1. Is requesting the report for employment purposes (which includes evaluating an applicant or employee for employment, promotion, reassignment, or retention as an employee).
2. Has provided the required disclosure to the applicant or employee.
3. Has obtained the necessary written authorization to request the report.
4. Will provide the applicant or employee with a copy of the report and a written description of the applicant or employee's rights before taking any "adverse action" based in whole or in part on the report.
5. Will not use the information from the report in a manner that violates federal or state equal opportunity laws. Many of these certifications are part of the "User Agreement" you agree to abide by.

The remaining disclosure and notice responsibilities are managed as follows:

Disclosure/Authorization
The FCRA requires any employer intending to obtain a Report to first make a clear and conspicuous written Disclosure to the prospective or current employee that a Report may be obtained for employment purposes (FCRA Sections 604 and 606). The Disclosure must be provided in a standalone document and cannot be included in an employment application or other document that contains additional information. The employer must also obtain the prospective or current employee's Authorization before obtaining the Report.

“Adverse Action” Notices
In the event an employer intends to take any "adverse action" based in whole or in part upon information contained in a Report, the FCRA requires the employer to make certain notifications to the applicant or employee (FCRA Section 604). For employment purposes, an "adverse action" means either: 1) a denial of employment; or 2) any other decision for employment purposes that adversely affects any current or prospective employee. The FCRA requires an employer to provide a copy of the Report to the applicant or employee along with a copy of his/her rights under the FCRA (the Summary of Your Rights Under the FCRA) before taking adverse action based upon information contained in the Report. The purpose is to give them the opportunity to see the Report that contains information that is being used against them. If the Report is inaccurate or incomplete, the applicant then has the opportunity to contact the parties involved to dispute or explain what is in the Report. Otherwise, they may be denied employment without ever knowing they were the victims of inaccurate or incomplete data. Give the individual a "reasonable" amount of time in which to respond. We call this letter the "Pre-Adverse Action Letter.”

After the decision is made to decline employment or terminate an employee based in whole or in part upon information contained in a Report, the FCRA requires that the employer must provide the applicant or employee with an additional notice that includes: (We call this notice the “Adverse Action Notice.”)

1. The name, address, and telephone number of the consumer reporting agency issuing the report.
2. A statement that the consumer reporting agency did not make the adverse decision and is not able to explain why the adverse decision was made.
3. A statement regarding the applicant or employee's right to obtain a free disclosure of the applicant or employee's file from the agency if the applicant or employee requests the report within 60 days of notice of the adverse action.
4. A statement regarding the applicant or employee's right to dispute directly with the consumer reporting agency the accuracy or completeness of any information provided by the agency.