Staying on the Right Side of the Law When Conducting Background Checks

When you’re hiring, background checks are a vital tool to help protect your business, your team, and your customers. But did you know that using these tools comes with legal responsibilities? The Fair Credit Reporting Act (FCRA) outlines how employers must handle background checks conducted through a third party, and not following the rules can result in serious penalties.

At Swailes Background Check, we make FCRA compliance simple for you. Here’s what every employer needs to know.

What Is the FCRA?

The Fair Credit Reporting Act (FCRA) is a federal law that regulates how consumer information is collected and used. When employers hire a consumer reporting agency (CRA), like Swailes, to conduct a background check, the FCRA sets strict rules on how the information is gathered, disclosed, and acted upon.

The law was designed to protect consumers, including job applicants, from misuse of their personal information. For employers, it creates a clear process for background screening.

When Does the FCRA Apply?

The FCRA applies whenever you request a background report from a third-party agency for employment purposes. That includes reports that cover:

Criminal records
Employment history
Education verification
Driving records
Credit history (if applicable)
Reference checks

If you’re using this information to make a hiring or employment decision, FCRA rules are in play, even for volunteer positions or contract roles.

The Three Core FCRA Requirements for Employers

To stay compliant, employers must follow these three critical steps:

1. Disclosure

Before ordering a background check, you must provide the applicant with a clear and separate written disclosure that a report will be obtained for employment purposes. This form must be its own document, not buried in a job application or other agreement, and must not include legal waivers or extra information.

2. Authorization

You must also obtain written consent from the individual before conducting the background check. This is typically combined with the disclosure and must be signed or acknowledged by the applicant.

3. Pre-Adverse Action Process

If you are considering making a negative decision based on the background report, such as not hiring the applicant, you must follow the pre-adverse action steps:

Provide a copy of the background report to the applicant
Include a summary of their rights under the FCRA
Give the applicant a reasonable amount of time (usually 5 business days) to review and respond before taking final action

Final Adverse Action

If, after the waiting period, you decide to move forward with the decision, you must send a final adverse action notice. This informs the individual that the decision is final and reminds them of their rights, including the right to dispute inaccurate or incomplete information.

Common FCRA Compliance Mistakes

Even well-meaning employers can get into trouble by making simple mistakes, such as:

Combining the disclosure with other job application forms
Including release-of-liability language in the disclosure
Failing to provide the applicant with a copy of the report and their rights before taking action
Skipping the final notice after the waiting period
Using background information without following the required process

Class-action lawsuits and regulatory fines are a real risk. Following the proper steps protects your business and respects the rights of your applicants.

How Swailes Background Check Keeps You Compliant

At Swailes, we don’t just provide fast, accurate background checks, we help you stay compliant every step of the way:

Pre-built, FCRA-compliant forms and templates
Automated workflows for disclosure, authorization, and adverse action
Alerts and reminders to help you meet timing requirements
Expert support to answer questions or guide you through unique situations

Our job is to make your job easier, and safer, when it comes to screening.

FCRA compliance isn’t optional, but it doesn’t have to be difficult. With the right partner, you can streamline your hiring process, stay on the right side of the law, and treat every applicant with fairness and respect.

Swailes Background Check is here to help. Our experience, tools, and support ensure you’re not just checking boxes, you’re building a better, safer workplace.

Need Help with Background Checks or Compliance?

Whether you’re hiring new talent or updating your screening processes, the Swailes Background Check team is here to help. From criminal background checks and FCRA compliance to drug testing, employment and education verifications, MVR reports, credit history reviews, and Social Security number validation, we provide fast enrollment and expert support every step of the way.

Contact us today to streamline your screening process with confidence.