When a background check company does not fix an error after a dispute, federal law still applies. The Fair Credit Reporting Act generally requires a reasonable reinvestigation within 30 days, and information found inaccurate, incomplete or unverifiable must be corrected or removed. A company that fails those duties may face liability, depending on the facts.
This page explains what the law expects of background check companies after a dispute and what the Fair Credit Reporting Act (FCRA) makes potentially available when a correction does not happen.
What the FCRA Requires of Background Check Companies
The FCRA, at 15 U.S.C. § 1681 and the sections after it, exists so that reporting companies "adopt reasonable procedures" that are fair to the consumer, "with regard to the confidentiality, accuracy, relevancy, and proper utilization" of the information, as 15 U.S.C. § 1681(b) puts it. Our overview of the FCRA covers the law as a whole.
Under 15 U.S.C. § 1681a(f), a consumer reporting agency (CRA) is a company that, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties. A consumer report, under 15 U.S.C. § 1681a(d), is a communication from a CRA bearing on a person's credit, "character, general reputation, personal characteristics, or mode of living," used or expected to be used for purposes including employment. The CFPB says that hundreds of companies provide employment background checks and qualify as consumer reporting agencies.
A reinvestigation is the CRA's second look at disputed information after the consumer challenges it. Under 15 U.S.C. § 1681i(a)(1)(A), subject to limited exceptions, the agency "shall, free of charge, conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item from the file." That must happen before the end of the 30-day period beginning on the date the agency receives the notice of the dispute from the consumer or a reseller. Under 15 U.S.C. § 1681i(a)(1)(B), the agency may take not more than 15 additional days if it receives information from the consumer during that period that is relevant to the reinvestigation. Under 15 U.S.C. § 1681i(a)(1)(C), that extension does not apply to a reinvestigation in which, during the 30 days, the information is found to be inaccurate or incomplete or the agency determines that it cannot be verified.
Common Background Check Errors
Errors a consumer may find in a background check report include:
- a criminal or court record belonging to someone else;
- a record that was expunged or sealed still appearing;
- the wrong outcome, such as an arrest reported as a conviction;
- old negative information reported past the period the law allows; the CFPB's Summary of Your Rights Under the FCRA says that in most cases a CRA may not report negative information more than seven years old, or bankruptcies more than 10 years old, with exceptions: under 15 U.S.C. § 1681c(a)(5) the seven-year limit for other adverse items does not cover records of convictions of crimes, and under 15 U.S.C. § 1681c(b)(3) the limits do not apply to a consumer credit report used in connection with the employment of an individual at an annual salary of $75,000 or more;
- identity errors from similar names or mismatched Social Security numbers.
A mixed file is a file holding information that belongs to a different person.
For public record information that is likely to have an adverse effect on a consumer's ability to obtain employment, 15 U.S.C. § 1681k(a) requires a CRA that furnishes a consumer report for employment purposes either to notify the consumer, at the time the information is reported to the user, that it is being reported, with the name and address of the person receiving it, or to "maintain strict procedures" designed to insure that the information is "complete and up to date."
A furnisher is a business that provides information about a consumer to a CRA, and the FCRA puts duties on furnishers too. Under 15 U.S.C. § 1681s-2(a), a furnisher generally may not report information it "knows or has reasonable cause to believe" is inaccurate.
What the FCRA Requires After a Dispute Is Filed
Within five business days of receiving a dispute, the CRA must tell the furnisher about it. Under 15 U.S.C. § 1681i(a)(2), the agency notifies "any person who provided any item of information in dispute," and the notice "shall include all relevant information regarding the dispute that the agency has received from the consumer." Information the consumer sends later in the reinvestigation period must be passed along promptly. When the reinvestigation is complete, 15 U.S.C. § 1681i(a)(6) requires the agency to give the consumer written notice of the results not later than 5 business days after completion, by mail or, if the consumer authorized it, by other means. If the reinvestigation does not resolve the dispute, the consumer may file a brief statement setting forth the nature of the dispute under 15 U.S.C. § 1681i(b).
The outcome follows from what the reinvestigation finds. The CFPB's rights summary states that "inaccurate, incomplete, or unverifiable information must be removed or corrected, usually within 30 days," and that "a consumer reporting agency may continue to report information it has verified as accurate." A "verified" answer is one possible result of a reinvestigation; our page on when a bureau won't remove information covers that situation.
A CRA may also stop a reinvestigation it "reasonably determines" is "frivolous or irrelevant," including when the consumer did not give enough information to investigate, under 15 U.S.C. § 1681i(a)(3). It must notify the consumer of that determination not later than 5 business days after making it, and the notice must give the reasons and identify any information required to investigate the disputed information.
Following a deletion of information found to be inaccurate or whose accuracy can no longer be verified, 15 U.S.C. § 1681i(d) provides that the CRA must, at the consumer's request, furnish notification of the deletion to any person the consumer specifically designates who received a consumer report for employment purposes containing that information within the two years before. The FTC's page also describes asking the background reporting company to send a copy of the corrected report to the employer and to tell the employer about the mistake. These are requests a consumer may make, as the FTC describes them.
Adverse Action Notices and the Right to Know
An adverse action, in the employment setting, includes "a denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee," under 15 U.S.C. § 1681a(k). Which decisions fall within that wording depends on the facts.
The employer's duties begin before the report is even ordered. Under 15 U.S.C. § 1681b(b)(2), an employer generally may not get a report for employment purposes unless it gave a clear written disclosure "in a document that consists solely of the disclosure" and the consumer authorized it in writing, with a narrow alternative under 15 U.S.C. § 1681b(b)(2)(B) for certain transportation positions, where the applicant applies by mail, telephone or computer and that has been the only interaction so far; oral, written or electronic notice and consent are then enough.
Before deciding against someone based on the report, the employer has another step. The FTC states that an employer "must give you a copy of the report and a 'Summary of Rights'" before deciding not to hire, keep or promote someone because of something in it. The statute, 15 U.S.C. § 1681b(b)(3)(A), puts it this way: before taking any adverse action based in whole or in part on the report, the person intending to take it must provide a copy of the report and a written description of the consumer's rights. For the transportation applicants described above, 15 U.S.C. § 1681b(b)(3)(B) instead provides for notification within 3 business days of taking the action. If an employer skipped that step, it may be a separate FCRA issue, depending on the facts.
After the decision, 15 U.S.C. § 1681m(a) requires, among other things, notice of the adverse action; the CRA's name, address and telephone number, including a toll-free number if the CRA compiles files on consumers nationwide; a statement that the CRA "did not make the decision" to take the adverse action and is unable to provide the specific reasons; and notice of the right to obtain a free copy of the report from the CRA, with an indication of the 60-day period for doing so, and of the right to dispute the accuracy or completeness of information in the report with the CRA.
When a Background Check Company Fails to Correct After a Dispute
A failure to correct is not automatically a violation. 15 U.S.C. §§ 1681n and 1681o give a consumer a private action against a person who willfully or negligently fails to comply with a requirement of the FCRA, but under 15 U.S.C. § 1681s-2(c) and (d) they do not apply to a furnisher's duties under 15 U.S.C. § 1681s-2(a), which the Federal and State agencies and officials identified in 15 U.S.C. § 1681s enforce. Whether a CRA's handling of a particular dispute violated a requirement depends on what it did, what it was sent, and what a court finds.
The statute separates two kinds of failure. Willful noncompliance is addressed in 15 U.S.C. § 1681n and negligent noncompliance in 15 U.S.C. § 1681o. The statute does not define either term, and which one applies, if either, is for a court to decide.
For willful noncompliance, 15 U.S.C. § 1681n(a) makes potentially available "any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000," plus "such amount of punitive damages as the court may allow," and, in a successful action, costs and reasonable attorney's fees as the court determines.
For negligent noncompliance, 15 U.S.C. § 1681o(a) makes potentially available "any actual damages sustained by the consumer as a result of the failure," and, in a successful action, costs and reasonable attorney's fees. None of this is automatic; it depends on the facts and on proof.
The FCRA also has a filing deadline. Under 15 U.S.C. § 1681p, an action must be brought by the earlier of two years after the plaintiff discovers the violation or five years after it occurs. State law may add protections, and it differs from state to state.
Agencies and the CFPB's List of Consumer Reporting Companies
Government agencies sit apart from the private lawsuits described above. An agency complaint is not a lawsuit.
The CFPB's Summary of Your Rights Under the FCRA states that "States may enforce the FCRA, and many states have their own consumer reporting laws."
The CFPB also publishes a list of consumer reporting companies, including employment screening companies, built from the companies' own descriptions. The CFPB says that list is not all-inclusive and does not reflect whether any company is subject to the FCRA. It can help a consumer find which company produced a report. No particular result follows from any complaint or inquiry to an agency.
If You'd Like a Consumer Rights Case Review
This page explains federal rules; it does not cover employment law beyond the background report itself.
A consumer rights case review can be requested through Federal Consumer Rights.
