It’s not uncommon for potential employers to request a background check when you apply for a job. But did you know that background reports are “consumer reports” under federal law and entitle you to certain protections when used? This article is for you if you were turned down for a job after a background report was used or if you are in the market for a job, promotion, insurance, or a place to rent.
What is a Background Report?
A background report, or a background check or consumer report, contains a wide array of information about you. This information commonly includes one or more of the following:
- Personal information
- Financial information
- Public records information
- Employment information
- Education information
Who May Use a Background Report?
Background reports are used by a variety of entities for many different reasons. Different users of background reports often request varying types of information. Some typical users of consumer background reports are the following:
Employers. Employers often use background reports as part of the hiring process to determine your suitability for a job. These reports may include criminal history, employment history, and education. Notably, while background checks are frequently used to make hiring decisions, they may also be used to make important decisions about existing employees that may affect promotions and retention. The same laws apply to both applicants and existing employees when background reports are used.
Landlords. Property management companies and landlords routinely use background reports and credit checks to screen potential tenants. These reports help landlords evaluate an applicant’s rental history, creditworthiness, and criminal background.
Financial Institutions. Banks, credit unions, and lenders use background reports, particularly credit reports, to assess an individual’s creditworthiness when considering applications for loans, credit cards, mortgages, and other financial products.
Insurance Companies. Insurance companies sometimes use background reports to assess risk when underwriting policies. For example, when determining insurance premiums for auto insurance, insurers may consider your driving record.
Government Agencies. Government agencies, especially those involved in security clearances and law enforcement, use background reports to investigate individuals’ backgrounds for security, employment, or licensing purposes.
Educational Institutions. Academic institutions, like colleges and universities, may request background reports that include transcripts and academic records as part of the admissions process.
Nonprofit Organizations. Some nonprofits and volunteer groups that work with vulnerable populations or children may conduct background checks to ensure that their volunteers or employees do not present a safety risk to those they serve. These organizations may review criminal and financial records.
Professional Licensing Boards. Licensing boards for roles such as physicians, attorneys, and teachers may require background checks as part of the licensure process to ensure that applicants meet certain ethical and legal standards.
What Law Covers Background Reports?
Because background checks or background reports are “consumer reports,” they are governed by legal regulations, including the Fair Credit Reporting Act or “FCRA.” The FCRA is a federal statute that regulates how consumer information is collected and used. While the name of the law implies a focus on credit reporting, the FCRA covers a wide range of consumer reports, including background checks.
Among other rights, such as the right to access your consumer reports, dispute inaccurate information, and consent to the release of your data – all discussed in other blogs on our site), the FCRA governs how and when background reports may be obtained and used.
Employers, insurers, and other entities that use background reports for employment, housing, or credit decisions must comply with the FCRA’s requirements.
When Can a Background Report be Obtained?
Before obtaining a background report about you, employers and others must obtain your written consent and provide a clear and conspicuous disclosure that a report may be requested.
What is a “clear and conspicuous disclosure,” you may ask? Great question. This is an essential requirement under the FCRA when a background report is obtained and used. It is important because it ensures that you are informed that this information is being requested. More importantly, it may be obtained and used only if you provide written consent.
If a background report has been obtained about you and you did not provide written consent, this very likely violated the FCRA, and you should consider contacting an experienced consumer rights attorney to explore your rights. Most will consult with you about this at no cost or obligation.
So, let’s expand on what “clear and conspicuous disclosure” is.
- #1 Plain and Easy to Read. A clear and conspicuous disclosure should be in plain language. This is so that it is easy to understand. You should not need a law degree to read this, so legalese and complicated terms should be avoided. The notice should tell you why the report is necessary and how it will be used.
- #2. Separate or Standalone Notice. The notice should not be buried in a lengthy job application or lease agreement. Making it a separate or standalone document ensures that you can see and have the chance to review the disclosure. The notice should not contain any additional requests, waivers, or consent forms for other purposes that are not directly related to obtaining the background report. The disclosure should be placed in a noticeable place in the document so you are likely to see it before providing any other information or consent.
- #3 Separate Signature Line. Your consent must be in writing. So, there must be a line or section for you to provide consent, affirming that you understand and agree to the background check.
- #4 Disclosure of Your Rights under the FCRA. The notice must tell you about your legal rights under the FCRA. This includes your right to request a copy of the background report, dispute inaccuracies, and be informed if adverse action is taken based on the report.
- #5 Contact Information. The notice should include contact information for the entity requesting your background report as well as the name of the consumer reporting agency that will provide the report. This allows you to reach out with any questions or concerns.
What are Common Types of Adverse Actions Taken Based Upon a Background Report?
As set out in this blog, lots of different entities use background reports for lots of different reasons. Some common types of adverse actions taken against consumers based on background report information include:
- Denial of job
- Rejection of a rental application
- Refusal to open a checking or deposit account
- Higher insurance premiums
- Denial of acceptance to college or university
- Rejection of licensure
- Denial of job promotion
- Termination from a job
What Happens if Negative Actions Are Taken Based Upon Your Background Check?
If the entity requesting or using our background report takes any negative action against you based on information in a background report, they must provide you with an adverse action notice. An adverse action notice is a written document (usually a letter) that must tell you (1) how to obtain a free copy of the report, dispute errors, and contact the reporting agency.
You may ask how you will know if the negative action was taken because of the background check. If a background check was used, and you received an adverse action, that is enough reason to get a free copy of the background report used. Once you have a copy and have reviewed it carefully for any errors, we suggest you promptly contact a consumer attorney experienced in credit reporting. Again, most will consult with you without any cost or obligation.