Are you researching on the background checks? If yes, chances are you will come across the Fair Credit Reporting Act (FCRA). There are times when you can also come across screening business companies mention that they comply with the FCRA rules and are afraid to violate the same. You might also feel that it is only applicable to the multi-million dollar business houses and companies? However, it is necessary to know that even small-scale businesses should stay FCRA compliant and follow the required guidelines.
Every business that’s resorting to employment background checks should stay FCRA compliant. When your small business violates the policies, the outcome can be jail time, civil penalties, and lawsuits. In 2018, as many as 422 trials got files for violating the Fair Credit Reporting Act.
Understanding the Fair Credit Reporting Act
Simply put, the Fair Credit Reporting Act comprises of specific federal laws that secure people’s data when it gets used for employment purposes and making credit checks. It generates the way business can make use of customer data and the details of the data. It also enables the business houses to analyze their data.
This act initially got implemented way back in 1970 as the credit reporting agencies were still holding on to incorrect and old business credit reports. Sometimes, business credit reports also got fabricated. And there can be companies purchasing these reports that can ultimately deny the opportunities and services depending on this data. It could get used for law enforcement situations. The company can’t check the reports or dispute any wrong data.
Who is benefited by FCRA?
The act generally secures those applicants that are providing their data. It empowers them with the capacity to assess the data, learn who is conducting background checks, and get alerted when there’s a wrong decision made primarily depending on the outcome.
However, FCRA also assists individuals by making them follow a reasonable way to manage applicant data. It further urges business houses to remain transparent and clear about the background screening tactics. And this, in turn, results in a balanced hiring process and enables business houses to select the ideal applicant or business partner for a job.
How can FCRA assist the employers?
If you have a small business, you also are an employer to a small set of people. The FCRA can help you in several ways, but you must maintain a few guidelines. Some of the requirements that a small business firm, as an employer should follow are:
- Have a single disclosure form – It’s essential to offer a job applicant with a proper disclosure form, letting them know about the background check.
- A notice for adverse action – Are you are planning to not hire a person depending on the background check? If yes, it’s essential to send an applicant this notice before you arrive at a decision. After that, provide the applicant sometimes to reply. Just in case an applicant disputes the data, it’s essential to consider that as well.
- A second notice for adverse action – Do you still don’t wish to recruit a specific applicant after their response? If yes, it is essential to send them this notice.
- Consent form – It is essential for the applicant to offer a written authorization of the single consent for background screening. And these forms usually need specific formatting and wording. Hence, it is essential to prepare the same following FCRA’s ways. It is necessary to time the employment screening with the Fair Chance Act, based on where you have your business.
The FCRA also puts forward specific requirements for the screening companies.
What FCRA needs for the background check companies?
If yours is a background check company, it’s crucial to follow the FCRA guidelines. And one of the essential guidelines is to make sure that the credit and criminal background checks contain as much accuracy as possible. Hence, the company must validate all the date they discover. It indicates that those companies which provide background check outcomes, in an instant, are mostly violating the act guidelines.
Any lawsuit filed under the FCRA, it carries the background check company and employer’s company name written in the legal suit. It has made the background check companies get concerned and stay aware of the FCRA guidelines and policies. Furthermore, the reputed and prominent background check companies generally make its procedures and policies FCRA compliant, for every background check.
The repercussions of violating FCRA
When a small business firm or any company violates the FCRA guidelines, it can result in various penalties based on the kind of breach. It also considers the number of times the company violated the guidelines. Some of the consequences are listed below:
- An unknowing violation – Has your company violated the FCRA without knowing? If yes, chances are your organization will have to witness a civil penalty and pay a fine.
- Many unknowing breaches – Every time your company violates the FCRA, it makes the company pay an extra $100 fine. It indicates that if your forms breach the FCRA policies and various people are using them, you have to pay a fine for all the form used.
- Conscious violation – When a company breaches the FCRA guidelines consciously and intentionally, the court imposes an extra fine. It depends on the extent of the damage that the breach had caused.
- Conducting background checks having no valid reason – The only way a company can get sentenced to jail time for breaching FCRA guidelines, is when they carry out a specific background check with no lawful reason. It can lead to serving federal prison for almost two years. When you are conducting a background review for employment, it is a valid reason under this act.
Hence, small scale business firms and other companies need to know and research the FCRA guidelines. It will let you know how it impacts your small business and the reasons why you need to stay FCRA compliant. Today, there are several online resources where you can study this. You can check out the informative finance and business sites and blogs to get adequate details.