Understanding the CRA and Its Role in Pre-Employment Background Checks

The Consumer Reporting Act is a set of laws governing the collection, use, and sharing of consumer information for any decisions that involve the person whose information you’re collecting. In the United States, the most common portion of the law that affects employers is the Fair Credit Reporting Act, or FCRA. This law establishes standards for consumer reports and provides protections to promote accuracy, privacy, and appropriate use of personal information.

History of the CRA

The Consumer Reporting Act goes back to 1970, when Congress first enacted the FCRA. The law went into effect in 1971. At the time, consumer reporting agencies were collecting and distributing more and more information about people, raising concerns about inaccurate reports, privacy, and inappropriate access to people’s personal information.

The law has been amended several times since then. This included the Consumer Credit Reporting Reform Act of 1996 and the Accurate Credit Transactions Act of 2003. These amendments increased consumer protections and clarified responsibilities for companies that provide, use, and maintain information.

Purpose of the Law

The consumer reporting law balances the legitimate need for consumer information with an individual’s right to accurate, appropriately used information. It requires consumer reporting agencies to follow reasonable procedures designed to give the highest level of accuracy, and it limits the circumstances in which consumer reports can be provided. The law also gives consumers certain rights, including the ability to dispute inaccurate information and receive disclosures when consumer reports are used for certain decisions.

How It Applies to Background Checks

The FCRA applies to many employment background checks when an employer obtains information from a company that compiles consumer reports. Employment reports can include criminal records, employment history, education information, driving records, and credit information. These reports can qualify as consumer reports because they may contain information about a person’s reputation, personal history, and living situation.

Employers usually must provide clear disclosure and obtain the applicant’s written permission before ordering a consumer report for employment decisions. If the information in the report can result in a rejection of employment, the employer usually must provide the person with a copy of the report and a summary of their rights before making the final decision.

If you’re an employer, make sure that any background check you order is an approved CRA background screening that is compliant with all applicable privacy laws, and that you follow the requirements outlined in the CRA and FCRA.