When a background check from a screening company costs someone a job, federal law generally requires the employer to share a copy of the report before deciding, and to send a notice after deciding. That notice names the company that made the report and explains the right to a free copy within 60 days and the right to dispute errors.
A job offer may be put on hold or withdrawn "based on the results of your background check." In some cases the applicant never saw the report; in others the report shows a record that is not theirs, a case that was dismissed, or something from long ago. The questions that follow are practical ones: was the employer allowed to do this, what did they owe me, and can a wrong report be fixed.
This page walks through what the Fair Credit Reporting Act (FCRA) requires of employers and of background-check companies, how errors are disputed, and what the law makes available when its rules are not followed.
What the FCRA Says About Employment Background Checks
Learning that a report you may never have seen has decided a job is unsettling, and the first thing worth knowing is that a background check from an outside company is usually a regulated document. The FCRA, which begins at 15 U.S.C. § 1681, opens with Congress's findings that inaccurate credit reports directly impair the efficiency of the banking system and that unfair credit reporting methods undermine the public confidence essential to its functioning.
The key term is "consumer report." Under 15 U.S.C. § 1681a(d), it means any written, oral or other communication of information by a consumer reporting agency bearing on a person's "credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living" that is used or expected to be used for, among other purposes, "employment purposes."
A consumer reporting agency is a company that compiles and sells these reports. The CFPB explains that credit reporting companies, also called credit bureaus or consumer reporting agencies, compile and sell credit reports, and that specialty companies may collect employment, tenant and public-record information. The CFPB also states that hundreds of companies provide employment background checks and qualify as consumer reporting agencies.
The law puts duties on both sides. The agency that prepares the report has accuracy and dispute duties. The employer, as a "user" of the report, has notice and consent duties. Before getting the report, an employer generally must give a clear written disclosure, in a document consisting solely of that disclosure, and get the applicant's written authorization, under 15 U.S.C. § 1681b(b)(2). A modified version of that rule applies only to an applicant for a position over which the Secretary of Transportation has the power to establish qualifications and maximum hours of service, or one subject to safety regulation by a State transportation agency, when the only interaction with the employer about the application has been by mail, telephone, computer or similar means.
The FCRA reaches decisions based on a report from a consumer reporting agency. An employer calling references itself or doing its own research is generally a different situation. A fuller overview of the statute is on this site's page on the Fair Credit Reporting Act.
The Two-Step Notice the Employer Must Give Before and After Rejecting You
Two separate notices are built into the process, one before the decision and one after it.
Before the decision. The CFPB states that, generally, if an employer wants to use a report to take an "adverse action," such as not hiring someone, it must give that person a copy of the report it received. The FTC's page on employer background checks and your rights says an employer must take certain steps before deciding not to hire, keep or promote someone because of something in the report, including giving a copy of the report and a "Summary of Rights." This is often called a pre-adverse action notice. Its practical purpose is a chance to see the report, and to spot a mistake, before the decision is final. The statute sets this out in 15 U.S.C. § 1681b(b)(3)(A): before taking adverse action based in whole or in part on the report, the person intending to take it shall provide the consumer "a copy of the report" and "a description in writing of the rights of the consumer under this subchapter." For an applicant to the transportation positions described above, 15 U.S.C. § 1681b(b)(3)(B) instead requires an oral, written or electronic notification within 3 business days of taking the action, in place of that copy and the notice under 15 U.S.C. § 1681m(a).
After the decision. Under 15 U.S.C. § 1681m(a), anyone who takes adverse action based "in whole or in part" on information in a consumer report must provide oral, written or electronic notice of the action. The statute also requires the person to give the consumer:
- the name, address and telephone number of the consumer reporting agency that furnished the report;
- a statement that the agency did not make the decision and cannot give the specific reasons for it;
- notice of the right to a free copy of the report from that agency, including the 60-day period for asking; and
- notice of the right to dispute the accuracy or completeness of information in the report with the agency.
Section 1681m(a)(2) also requires a written or electronic disclosure of any numerical credit score used in taking the adverse action, and the related information the statute lists. The free-copy and dispute rights that this notice points to are explained in the sections below.
If an employer skips the copy-of-the-report step or never sends the after-decision notice, that may violate the FCRA. Whether it does in a particular case depends on the facts, including whether the decision was actually based on the report.
Errors in Background Check Reports and How the FCRA Addresses Them
Background reports get things wrong in recognizable ways. One is a mixed file, meaning a report that blends in records of someone else with a similar name or birthdate. Others include sealed or expunged records still appearing, a case shown with the wrong outcome (an arrest listed as a conviction), or information too old to report.
Age limits. Under 15 U.S.C. § 1681c(a), a consumer reporting agency generally may not report civil suits, civil judgments and records of arrest older than seven years from entry, or until the governing statute of limitations has expired, whichever is longer; paid tax liens older than seven years from payment; accounts placed for collection or charged to profit and loss that are more than seven years old (a period that, for a delinquent account, begins when the 180-day period after the delinquency began has expired, under 15 U.S.C. § 1681c(c)(1)); bankruptcy cases older than 10 years; or other adverse items older than seven years. Records of criminal convictions are carved out of that last seven-year rule. Under 15 U.S.C. § 1681c(b), these limits do not apply to a consumer credit report used in connection with, among other things, the employment of any individual at an annual salary which equals, or may reasonably be expected to equal, $75,000 or more.
Disputing with the agency. Under 15 U.S.C. § 1681i(a)(1)(A), when a consumer disputes the completeness or accuracy of an item, the agency must, free of charge, conduct a "reasonable reinvestigation" (a fresh look at whether the disputed item is accurate) and record its current status or delete it within 30 days of receiving the dispute, unless it reasonably determines that the dispute is frivolous or irrelevant, in which case it may terminate the reinvestigation and must notify the consumer within 5 business days (15 U.S.C. § 1681i(a)(3)). That period may be extended by up to 15 days if the consumer sends relevant information during the 30 days, but not if the item is found inaccurate or unverifiable first. Within five business days, the agency must notify the furnisher, the source that supplied the item, with all relevant information from the consumer.
The furnisher's duties. Once notified, the furnisher must investigate, review what the agency sent, report results, and promptly modify, delete or permanently block an item found inaccurate, incomplete or unverifiable, under 15 U.S.C. § 1681s-2(b). The CFPB notes a consumer can dispute both with the reporting company and with the company that provided the information.
The CFPB's Summary of Your Rights states that inaccurate, incomplete or unverifiable information must be removed or corrected, usually within 30 days, though an agency may keep reporting information it has verified. More on what happens after a dispute is on this site's page on credit report errors.
Discrimination Concerns: Where Equal Employment Law Comes In
The FCRA is a process law. It governs how a report is obtained, how accurate it must be and what notices go with it. It does not, by itself, decide whether an employer's screening policy is fair to a particular group of people.
That second question belongs to federal and state equal employment opportunity law, a separate framework with its own rules and its own enforcement. The FCRA points to it directly: under 15 U.S.C. § 1681b(b)(1), an agency may furnish a report for employment purposes only if the employer certifies, among other things, that information from the report "will not be used in violation of any applicable Federal or State equal employment opportunity law or regulation."
The FTC also notes that laws in a person's city or state might affect if or when employers can ask about criminal or credit history. State and local rules differ from place to place.
Whether a particular screening policy crosses a line under anti-discrimination law depends on the policy, the job and the facts, and is analyzed apart from the FCRA's notice and accuracy rules. Employment-discrimination law itself is outside what this page covers.
What the FCRA Makes Available When Its Requirements Are Not Followed
The FCRA sets its own remedies, and they turn on why a requirement was not met. The CFPB's summary of rights states that if a consumer reporting agency, or in some cases a user of reports or a furnisher, violates the FCRA, a consumer may be able to sue in state or federal court.
Willful noncompliance. Under 15 U.S.C. § 1681n(a), a person who "willfully fails to comply" with an FCRA requirement is liable for "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"; "such amount of punitive damages as the court may allow"; and, "in the case of any successful action," costs "together with reasonable attorney's fees as determined by the court."
Negligent noncompliance. Under 15 U.S.C. § 1681o(a), a person who is negligent in failing to comply is liable for actual damages sustained as a result of the failure and, in a successful action, costs and reasonable attorney's fees as determined by the court. There is no statutory-damages range or punitive award in that section.
Under 15 U.S.C. § 1681n(c) and § 1681o(b), on a finding that an unsuccessful pleading, motion or other paper was filed in bad faith or for purposes of harassment, the court shall award the prevailing party attorney's fees reasonable in relation to the work expended in responding to it. Whether any failure was willful, negligent or neither, and whether any remedy is available, depends on the specific facts.
Time limits. Under 15 U.S.C. § 1681p, an action must be brought not later than the earlier of "2 years after the date of discovery by the plaintiff of the violation" or "5 years after the date on which the violation … occurs." This site's page on consumer rights remedies compares the FCRA with other federal consumer laws.
Steps a Consumer May Take After a Background Check Affects a Job Decision
After a lost offer, it can feel as if the decision is closed. The FCRA gives a consumer several options that remain open.
Getting the report. Under 15 U.S.C. § 1681j(b), the agency must provide its file disclosure without charge if the consumer asks not later than 60 days after receiving the adverse action notice. The FTC's page describes the window as 60 days from the employer's decision; the statute counts the 60 days from the consumer's receipt of the notice. The notice itself names the agency.
Reviewing it. A consumer may compare the report against court records and personal history, looking for records that belong to someone else, outdated entries, sealed matters or wrong outcomes.
Disputing errors. The dispute process under section 1681i(a)(1)(A) is described above. In practical terms, the FTC's page describes contacting the background reporting company, following its dispute instructions, including supporting documents, and asking the company to send a corrected report to the employer. If an item stays after a dispute, this site's page on a credit bureau that won't remove information covers that situation.
Complaints to agencies. The CFPB states that a person with a credit reporting problem can submit a complaint to the CFPB. The FTC's background-check page includes a section on reporting to the FTC.
State-law overlay. The CFPB's summary of rights notes that many states have their own consumer reporting laws and that, in some cases, a consumer may have more rights under state law. Those rules differ from state to state.
If You'd Like a Consumer Rights Case Review
Background-check problems tend to turn on paperwork and dates: when the authorization form was signed, whether a copy of the report arrived before the decision, what the after-decision notice said, which reporting agency prepared the report, and whether a dispute was sent and how it was answered. This page does not cover employment-discrimination claims or employment law beyond background-check reports.
A reader may request a consumer rights case review through Federal Consumer Rights.
