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Seven Fast Facts About Background Checks


  1. Unlike the name implies, the Fair Credit Reporting Act (FCRA) covers much more than just credit reports. The FCRA applies when an employer uses a third-party provider to check an applicant’s background, even when not requesting a credit report. Driving records, criminal histories, court records and employment references are all “consumer reports” covered by the Fair Credit Reporting Act.

  2. When using a third-party provider to gather background information, the Fair Credit Reporting Act requires a 3-step process:

    1. Obtain a proper consent before requesting the consumer report;

    2. Send certain information to an applicant or employee before you decide not to hire or promote them; and

    3. Send a sufficient notice to the applicant or employee after you decide not to hire or promote them.

  3. Failure to carefully comply with the Fair Credit Reporting Act can make an employer liable for:

    1. The employee or applicant’s actual damages; and

    2. Costs and reasonable attorney’s fees.

    • If the violation is considered willful or intentional, the employer can also be liable for:

    1. Damages to the employee or applicant of up to $1,000;

    2. Punitive damages, as determined by the court; and

    3. Costs and reasonable attorney’s fees.

  4. The applicant or employee must be given a Fair Credit Reporting Act summary of rights and sign the consent prior to requesting the background check. This notice and consent can be in the same document but must be provided separate from the application.

  5. The Fair Credit Reporting Act summary of rights and consent cannot contain additional information or language. If it contains a release of liability it violates the Fair Credit Reporting Act.

  6. Guidance from the EEOC indicates that information obtained from a background check should be reviewed on a case-by-case basis and considered in light of the applicant or employee’s individual circumstances. Blanket policies that flat-out exclude individuals with any misdemeanor or felony conviction may constitute unlawful discrimination.

  7. Only convictions may be considered. EEOC guidance and court cases indicate that acting on the basis of an arrest without actual conviction is discriminatory.


Background information is an important source of information when making a decision to hire, promote, or retain an individual. However, the Fair Credit Reporting Act sets forth procedures for requesting and considering this information. Failing to follow these procedures to the letter of the law exposes an employer to considerable risk of suit for money damages and, in some cases, criminal liability.


The Employment Source is knowledgeable in reviewing your employment policies to make certain you do not run afoul of the Fair Credit Reporting Act or any other law regarding background checks. Illinois and Iowa employers concerned about following proper employment procedures are encouraged to contact us to review and update their employee handbook, application forms and hiring procedures. At The Employment Source, we’ve got your back.




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