The federal law that regulates the collection, dissemination, and use of consumer information, including consumer credit information. The Fair Credit Reporting Act can be found at, 15 U.S.C. § 1681 et seq. and also electronically at www.ftc.gov
Background Screening Terms
Fair Credit Reporting Act (FCRA)
The two-step process an employer is required to follow anytime the employer intends to make an adverse decision with respect to the individual’s employment if the decision is based, in whole or in part, on information contained in the Consumer Report.
Adverse Action (related to employment)
Step 1 (commonly “Pre-Adverse Action”)
Prior to actually taking Adverse Action, the employer must provide the individual with a copy of the Consumer Report, the FTC document “A Summary of Your Rights Under the FCRA”, and provide an opportunity for him/her to dispute inaccurate or incomplete information prior to a final decision being made.
Communicating with the individual that adverse action is being taken (i.e. the individual will not be hired, promoted, etc.), as explained in Section 615 of the FCRA.
Step 2 (commonly “Adverse Action” or “Final Adverse Action”)
A one-step adverse action process communicating with the individual that adverse action is being taken as explained in Section 615 of the FCRA.
Consumer Financial Protection Bureau
A federal agency whose oversight includes, amongst other things, consumer protection. Conduct rulemaking, supervision and enforcement with respect to the Federal consumer financial laws; Handle consumer complaints and inquiries; Promote financial education; Research consumer behavior; and, Monitor financial markets for risks to consumers.
A report or document containing one or more of the following pieces of information about an individual: credit standing, credit history, credit capacity, personal characteristics, character, general reputation, and/or mode of living. This information is primarily provided through verification of employment, references, education, licensure as well as criminal, motor vehicle, and credit report record gathering. The report is prepared by a third party and used by employers and landlords when considering the individual for employment or tenancy (but may be used for other permissible purposes as outlined in the FCRA). Consumer Reports are often referred to as Background Investigations, Background Checks, Screening Reports, and other similar names.
Investigative Consumer Report
A Consumer Report that includes interviews with the individual’s friends, neighbors, associates or former employers. Exception: In California, all Consumer Reports, except stand-alone credit reports, are considered “Investigative Consumer Reports.”
(CRA) Business that assembles information on individuals at the request of a third party, i.e. their client (often an employer, landlord, etc.). CRAs are provided with certain information pertaining to an individual such as name, date of birth, social security number, address, etc. and use that information to gather additional information and compile its findings into a report to be used for employment purposes, tenancy and credit evaluation and other purposes. Note: Consumer Reporting Agencies are often referred to as “Background Screening Companies”, credit bureaus are also considered Consumer Reporting Agencies (background screening companies are not, however, considered credit bureaus).
Consumer Reporting Agency
A report consisting of an individual’s credit history including, but not limited to, items such as payment history, liens, charge-offs, bankruptcies and other actions as well as outstanding balances held. Credit Reports are prepared by credit bureaus (see links below to the three primary credit bureaus) or their authorized agents and may be contained in a Consumer Report. Credit Reports obtained for employment purposes do not include a (FICO) score, while tenant credit reports may show the (FICO) score. A consumer may contact a credit bureau directly to dispute credit information the consumer believes is inaccurate.
The consumer has the right to dispute inaccurate information in their consumer report. The FCRA requires consumer reporting agencies to reinvestigate the matter to confirm the information is accurate, delete or correct information that is inaccurate, and/or delete information which cannot be confirmed, usually within 30 days and free of charge. If the reinvestigation results in a change in the consumer report, the CRA must provide the individual and the End-User with an updated copy of the report.
An entity (employer, landlord, etc.) that requests a Consumer Report from a Consumer Reporting Agency for a permissible purpose (i.e. employment or tenancy).
A federal agency whose oversight includes, amongst other things, consumer protection, including consumer reporting laws, and anticompetitive trade practices.
Federal Trade Commission (FTC)
The instances which the FTC has deemed acceptable for an End-User to obtain a Consumer Report. Employment and Tenancy are common types of permissible purposes.
A document prepared by the Federal Trade Commission intended as a resource for individuals which states their rights with respect to Consumer Reports. This document must be provided to an individual anytime the individual receives a copy of his/her report, including those instances where an adverse hiring/tenancy decision is made and a copy of the report must be provided. The official name of this document is “A Summary of Your Rights under the Fair Credit Reporting Act.”