Fair Credit Reporting Act (FCRA) Compliance

Last Modified: Jun 8, 2022

Background screening reports are “consumer reports” under the FTC's FCRA when they serve as a factor in determining a person’s eligibility for employment, credit, insurance, housing, or other purposes and they include information “bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.” Companies that sell or provide those reports are “consumer reporting agencies” or CRA's under the FCRA.

The FCRA allows companies such as Ferretly International, Inc to provide consumer reports to employers under specific guidelines.  CRA's are required to perform the following:

Follow reasonable procedures to assure accuracy. Among other things, the FCRA requires you to establish and follow “reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.”  Certain practices may be indicators that a background screening company isn’t following reasonable procedures. For example, if a report lists criminal convictions for people other than the applicant or employee – for instance, a person with a middle name or date of birth different from the applicant’s – that raises FCRA compliance concerns. Other indications that a company’s procedures might not be reasonable include screening reports with multiple entries for the same offense or that list criminal records that have been expunged or otherwise sealed.

Get certifications from your clients.  Consumer reporting agencies may provide consumer reports only to those with a specific permissible purpose, like employment. So verify that your clients are legitimate and get them to certify that they will use the reports only for employment purposes. In addition, the FCRA gives job applicants and employees the right to know that information about them is being reported to employers or potential employers. Therefore, you must get certifications from your clients attesting that:

  1. The employer notified the applicant and got the applicant’s written permission to get a background report;
  2. The employer will comply with the FCRA’s requirements; and
  3. The employer won’t discriminate against the applicant or employee, or otherwise misuse the information in violation of federal or state equal opportunity laws or regulations.

Provide your clients with information about the FCRA. The FCRA requires you to provide your clients with information about their responsibilities under the statute (Notice to Users of Consumer Reports) and a summary of consumer rights under the FCRA (A Summary of Your Rights Under the Fair Credit Reporting Act), which you can provide with the background screening report or before providing a report. These are standard documents available from the Consumer Financial Protection Bureau.

Honor the rights of applicants and employees.  The FCRA gives consumers certain rights with which you must comply. For example, you must give them access to their files when they ask for them, conduct a reasonable investigation when they dispute the accuracy of information, and give them written notice of the results of investigations. It’s a violation of the FCRA not to respond in a timely way to consumers’ inquiries and disputes. Another FCRA violation: creating unreasonable obstacles for consumers trying to exercise their rights under the FCRA.​


Congress has limited the use of consumer reports to protect consumers’’ privacy. All users must have a permissible purpose under the FCRA to obtain a consumer report. Section 604 contains a list of the permissible purposes under the law. These are:

  • As ordered by a court or a federal grand jury subpoena. Section 604(a)(1)
  • As instructed by the consumer in writing. Section 604(a)(2)
  • For the extension of credit as a result of an application from a consumer, or the review or collection ofa consumer’s account. Section 604(a)(3)(A)
  • For employment purposes, including hiring and promotion decisions, where the consumer has given written permission. Sections 604(a)(3)(B) and 604(b)
  • For the underwriting of insurance as a result of an application from a consumer. Section 604(a)(3)(C) When there is a legitimate business need, in connection with a business transaction that his initiated by the consumer, Section 604(a)(3)(F)(i)
  • To review a consumer’s account to determine whether the consumer continues to meet the terms of the account. Section 604(a)(3)(F)(ii)
  • To determine a consumer’s eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant’s financial responsibility or status. Section 604(a)(3)(D)
  • For use by a potential investor or services, or current insurer, in a valuation or assessment of the credit or prepayment risks associated with an existing credit obligation. Section 604(a)(3)(E)
  • For use by state and local officials in connection with the determination of child support payments, or modifications and enforcement thereof, Section 604(a)(4) and 604(a)(5)

In addition, creditors and insurers may obtain consumer report information for the purpose of making“prescreened” unsolicited offers of credit or insurance. Section 604(c).

Other links:

Complete FCRA Guidelines