Understand the Potential Legal Issues

Background checks can reveal a wealth of information including criminal, financial, employment, driving, educational, and other records. While this can sometimes seem like an invasion of privacy, there are laws in place to protect individuals from unfair discrimination. To make certain the information revealed in a background check is used in a proper manner, both the individual being subjected to the check and the party requesting it should understand what information can and can’t be used in evaluating eligibility for employment, housing, or credit. Consistently adhering to these regulations ensures a fair and legal screening process.

Who Has Access to Background Check Information?

In an effort to maintain a safe workplace and ensure a pool of responsible employees, background checks are a common part of the employment screening process. However, landlords, lenders, and other agencies may also pull an individual’s criminal background, credit report, or other type of history as part of a variety screening processes. In addition, vital records, criminal history, court and legal records, property records, and information on social media sites are part of the larger public record and can often be accessed without consent by any interested party with a first and last name they wish to research.

Still, if a background check is used in screening for employment, housing, credit, or any other purpose covered under the Fair Credit Report Act (FCRA), there are regulations regarding how this information is obtained, used, and disclosed. Employers, landlords, lenders, or others looking to perform a background check must:

• Obtain a release. Employers, landlords, lenders, or other interested parties must receive written permission from an applicant before they can run a background check. Applicants must also be provided with a summary of their rights under the Fair Credit Report Act (FCRA) before any credit reports are pulled.
• Disclose the results. If you run a background check on an individual which results in negative consequences, such as being turned down for a loan or not being hired, you are required to disclose the results to that individual. You must also include the identity of the reporting agency that provided this negative information, and allow a reasonable amount of time for the individual to respond or correct any inaccurate information.
• Comply with all FCRA regulations. Any company that compiles consumer reports for the purpose of obtaining credit, insurance, or employment must abide by the FCRA. A consumer report is information gathered about an individual that is processed and sold and affects or discloses creditworthiness, standing, capacity, personal character, general reputation, or lifestyle. Even if the information is gathered through public records or the company does not consider itself to be a consumer reporting agency, it is still regulated by the FCRA.
• Be consistent. All applicants must undergo the same screening process, without variations or exceptions.

What Can and Can’t Be Used Against an Applicant?

Not everything you find in a credit report is fair game when it comes to using that information to deny someone a job, tenancy, or money. Be sure to pay careful attention to these rules to avoid getting into legal trouble.

• Criminal record. Laws regarding the extent to which an employer may use an individual’s criminal history as a deciding factor in the hiring process can vary from state to state. Therefore, check with a lawyer or the proper legal authorities for specifics.
• Credit report. Negative credit history can be used to deny loans, new lines of credit, housing, and even employment. However, under FCRA regulations, a copy of the report containing this negative information must be provided to the individual along with information about their right to challenge this report. Please note that some states may have stricter laws about using this type of information for employment screenings. In addition, though bankruptcy may show up on a credit report, according to the Federal Bankruptcy Act, employers cannot discriminate against applicants based on the fact they have filed for bankruptcy.
• Medical history. Medical records are confidential and cannot be accessed by potential employers. Rather, employers can only inquire about an individual’s ability to perform certain tasks associated with the position, considering reasonable accommodations. Applicants are protected against discrimination under the Americans with Disabilities Act.
• Driving record. Accidents or tickets on an individual’s driving record may be important if an applicant is being considered for a job as a bus driver, delivery driver, or other occupation that requires regular use of a company-owned vehicle.
• Military service. Details about military service are generally considered confidential and usually released only with the written consent of the service member.
• School records. Records such as transcripts, financial documents, or recommendations are private and only released with a student’s written consent.
• Past work experience. If an applicant willingly provides references, an employer, lender, or other interested party may contact these former employers about past positions, salary, performance, and any other information relevant to the screening process.

An Applicant’s Rights

In instances where an individual is being evaluated for employment, housing, credit, or other purposes covered under the FCRA, the party requesting the background check must obtain a release form and disclose any negative findings. Applicants should also be made aware of the following:

• Right to a free yearly credit report. Everyone has a right to one free credit report annually.
• Correcting inaccurate information. Everyone has the right to contest any misinformation that shows up on their report. This is one reason it is wise to check credit reports from time to time, making sure that all information is current and correct.
• Willful noncompliance. If a company fails to comply with a FCRA requirement willfully, it is liable to the consumer for up to $1,000.