The Fair Credit Reporting Act (FCRA) is the federal law that regulates consumer reports, i.e., background check reports. The FCRA has another purpose – the consumer lending protection law – but this article focuses on its regulations and their impact on background screening reports.

The FCRA requires that consumer reports be obtained with proper consumer consent and for a permissible business purpose. Permissible business purposes include the following (and many more):

  • Employee Screening
  • Volunteer Screening
  • Resident/Tenant Screening
  • Franchisee Screening
  • Membership Screening
  • Board of Directors Screening
  • Client Screening

Employee screening is the most regulated by the FCRA, and requires different consumer disclosures and authorization forms, as well as different service agreements to establish the employee screening account with the background screening company. If your company or organization has a different type of background screening account, e.g., tenant screening or franchisee screening, it cannot use tenant screening or franchisee screening disclosures and products for employee screening purposes, or any other type of background screening purpose.

When establishing a background screening relationship, companies and organizations should ensure they are dealing with a reputable consumer reporting agency (CRA). Not all background screening companies are CRAs. A CRA understands the differences between permissible business purposes, and has appropriate service agreements and disclosure forms for compliance with the FCRA. Further, a reliable CRA has dispute processes in place to protect consumer dispute rights, as provided under the Fair Credit Reporting Act.

Virtually all businesses have employees, so employee screening is a common need. However, when the business is an apartment and also needs resident/tenant screening, or a franchisor needing franchisee screening, or a country club needing membership screening – it is imperative that the business never use their tenant/franchisee/membership screening account and disclosures for their employee screening needs – or for any other type of background screening purpose, and vice versa.

Posted by: Rudy Troisi, President and CEO, Reliable Background Screening

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