FTC Offers Facts for Consumers about Credit Reports and Employment Background Checks

By Les Rosen, President of ESR & Thomas Ahearn, ESR Staff Writer

The Federal Trade Commission (FTC) – the nation’s consumer protection agency – issued “FTC Facts For Consumers” in May 2010 that explains “Credit Reports and Employment Background Checks” to consumers who have applied for jobs.

Although the new FTC notice  has been criticized for containing some information that is  technically inaccurate, it still provides helpful information for consumers.

The FTC asks consumers the following question about background checks and credit reports:

Did you know that when you apply for a job, an employer is permitted to do a background check before hiring you? Depending on the employer and the job, that background information might include your employment history, your driving record, and your credit report.

A credit report, according to the FTC, has information about where a consumer lives, how they pay bills, whether they have been sued or arrested, or have filed for bankruptcy. Credit report companies sell the information in credit reports to employers and other businesses that use that information to evaluate applications for employment, credit, insurance, or renting a place to live. Employers also are allowed to use credit reports to evaluate an employee for retention, promotion, or reassignment.

The FTC enforces the Fair Credit Reporting Act (FCRA), a law that protects the privacy and accuracy of the information in a consumer’s credit report. The FCRA spells out the rights of a job applicant and an employer’s responsibilities when using credit reports and other background check information to assess an application for employment.

The FTC also details key employment provisions of the FCRA, most notably that employers must get permission from job applicants before asking for background check reports about them from a credit reporting company or any other company that provides background check information.

In addition, if an applicant does not get a job because of information in a background check report, the employer has certain legal obligations: 1.) an employer must show applicant the report, and 2.) the employer must tell the applicant how to get his or her own copy. The report is free if the applicant asks for it within 60 days.

The FTC provides more details about these key provisions:

  • Notice and Authorization: Before an employer can ask for credit report or background check report about an applicant from any companies that provide them, it must tell the applicant that it might use the information to make an employment decision.
  • Pre-Adverse Action Procedures: If an employer might use information from a credit report or background check report to take an “adverse action” – for example, to deny an application for employment – the employer must give the applicant a copy of the background check report and a document called ‘A Summary of Your Rights Under the Fair Credit Reporting Act’ before taking the adverse action.
  • Adverse Action Procedures: If an employer takes an adverse action against an applicant based on information in a credit report or background check report, it must notify the applicant and that notice must include: 1.) the name, address, and phone number of the company that supplied the credit report or background check report information; 2.) a statement that the company that supplied the credit report or background check report didn’t make the decision to take the adverse action and can’t give the applicant any specific reasons for it; and 3.) a notice of the applicant’s right to dispute the accuracy of any information in the credit report or background check report and to get an additional free report from the company that supplied the credit report or background check report if he or she asks for it within 60 days.

To fix any inaccurate or incomplete information in a background check report, the FTC advises the applicant to contact the background check company that issued the report and dispute the information. If an investigation reveals that a correction is warranted, the company must send an updated report to the employer if asked to do so.

In addition, a ‘Notice of Negative Public Records’ requires that if a company provides an employer with a credit report or background check report that has negative information about an applicant gathered from public records, that company either has to tell the applicant that it provided the information to the employer or has to take special steps to make sure the information is accurate.

The FTC also warns that there are legal consequences for employers who don’t comply with the FCRA if they:

  • Fail to get an applicant’s okay before getting a copy of their credit report or background check report;
  • Fail to provide the appropriate disclosures in a timely way, or;
  • Fail to provide adverse action notices to unsuccessful job applicants.

The FTC advises applicants to report FCRA violations by employers because the law allows the FTC, other federal agencies, and states to sue employers who don’t comply with the law’s provisions. The FCRA also allows people to sue employers in state or federal court for certain violations.

Before applying for a job, the FTC suggests jobseekers order a free copy of their credit report from each of the three nationwide credit reporting companies – Equifax, Experian, and TransUnion – that are required by law to provide consumers once every 12 months (if the consumers ask). To order free credit reports, consumers should visit AnnualCreditReport.com at http://www.annualcreditreport.com/, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

For more information about the use of credit reports during background checks, please visit Employment Screening Resources (ESR) at http://www.esrcheck.com.



http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre36.pdf (PDF file)

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre35.pdf (PDF file)


http://www.ftc.gov/bcp/edu/resources/forms/requestformfinal.pdf (PDF file)