Avoiding credit check problems

With economic difficulties besetting many of your job candidates or current employees, you might feel it necessary to run a credit check to mitigate potential risks related to shrinkage or outright malfeasance. If you decide that credit checks are in your plans, become familiar with The Fair Credit Reporting Act.

Under the act, before you can get a credit report for any employment purpose, you must notify the individual  you are investigating in writing — in a document consisting solely of this notice — that a credit report may be requested and used for an employment purpose.

You also must get the person's written authorization before you ask a consumer reporting agency (CRA) for the report.

If you rely on a consumer report for an "adverse action"—denying a job application, reassigning or terminating an employee, or denying a promotion—you must do the following:

Step 1: Before you take the adverse action, you must give the individual a pre-adverse action disclosure that includes a copy of the individual's consumer report and a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act"—a document prescribed by the Federal Trade Commission.

Step 2: After you've taken an adverse action, you must give the individual notice—orally, in writing, or electronically—that the action has been taken in an adverse action notice. The notice must include:

• The name, address, and phone number of the CRA that supplied the report; 
• A statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give specific reasons for it; and 
• A notice of the individual's right to dispute the accuracy or completeness of any information the agency furnished, and his or her right to an additional free consumer report from the agency upon request within 60 days. 

If you have questions about this or other human resources issues, please contact Business Advantage International or Allen Miller at 801.444.9919.