Why You Need An FCRA Compliant Business For Employment Background Checks

Understanding the difference between public records sites and FCRA compliant businesses.

Hiring new employees is one of the most important and difficult responsibilities for any business. It is essential to find candidates who can excel in the position, and become reliable, trustworthy team members.

To accomplish this task, most companies send applicants through a multi-layered process. This includes submitting a resume, attending multiple interviews, filling out paperwork and a pre-employment background screening.

What You Need To Know About Pre-Employment Background Screening

Background screenings are among the most decisive factors in the hiring process. They provide a wealth of information that empowers hiring managers to conclude whether or not a candidate will be offered employment.

There are several key guidelines employers must follow when establishing a background screening process. It is crucial for hiring managers to understand the legal requirements they must adhere to when screening any applicant. First and foremost, employers must obtain background reports from an FCRA compliant business. The FCRA, or Fair Credit Reporting Act regulates the collection and usage of consumer information.

Only an FCRA compliant business, also known as a consumer reporting agency, is legally allowed to provide data that helps employers make hiring decisions. Businesses that do not utilize a compliant consumer reporting agency may be subjected to legal action. If an applicant is turned down based on the results of a background screen not conducted by a compliant business, that person has the right to sue their prospective employer.

When screening applicants, many companies turn to public records sites that promise to provide information about “anyone in the United States.” What these companies may not realize is that a public records, or people search website, is not a consumer reporting agency.

The Difference Between A Public Records Provider And A Consumer Reporting Agency

Public records websites provide information that is collected from a variety of sources, such as magazine subscription cards and voter registration forms. Although they can provide valuable information, these sites are not legally obligated to ensure that they have current or accurate data. These sites all post disclaimers stating that they provide information for reference purposes only. They cannot verify that the data is correct. Information provided by these sites may not legally be used to make hiring decisions.

Consumer reporting agencies are legally bound to provide current and accurate information. They provide authoritative and verified data about an individual’s work history, criminal records, drug testing and other relevant details. This information may be used to make hiring decisions.

Another differentiator between public records sites and consumer reporting agencies involves legal compliance with an FCRA regulation. Applicants must agree to a background check, and be informed in writing before a screening begins. If this does not happen, the applicant has the right to take legal action against the company that initiated a background check.

Consumer reporting agencies manage these mandatory steps. Public records sites, however, do not require any sort of notice for background checks. These sites provide basic background information, such as address histories and possible criminal records. They do not, however, confirm that any of this information is current, accurate or even attributed to the right person. Anyone can use a public records site to run a background check on another person.

Applicants do have the right to refuse a background screening. When this happens, the potential employer is likely to ignore that person’s bid for a job. If however, the applicant agrees to the screening, the potential employer must adhere to all rules specified by the FCRA and enforced by the Federal Trade Commission (FTC).

Guidelines For A Pre-Employment Background Screening

Aside from being notified about a screening, applicants must also be told how they can get a copy of their own background report. If a company refuses to hire an individual based on the results of a background check, then they must follow specific guidelines. First the applicant must receive a pre-adverse action disclosure along with a copy of their consumer report and a FTC document called “A Summary of Your Rights Under the Fair Credit Reporting Act.” After the candidate is formally informed of an adverse action (such as being denied a job) against them, they must also receive an adverse action notice.

All of these steps are managed by consumer reporting agencies, such as MacData Background Screening. Companies that choose not to utilize an FCRA compliant business may be subjected to a lawsuit. When the person who files the suit wins, they may also be entitled to request court costs and other legal fees.

State And Industry Regulations

Consumer reporting agencies, unlike public records sites, are also obligated to keep up with all state, federal and industry regulations. Many states have different laws regarding background screening practices for recruitment. Some industries, especially the trucking industry, also have unique guidelines. An FCRA compliant company will be aware of these regulations, and work with their clients to ensure they remain compliant at all times. Public records sites are under no obligation to be aware of or follow the same regulations. Therefore, companies that use public records sites for background screening purposes take the risk and responsibility of not collecting data properly upon themselves.

Before You Start Screening

FCRA compliant businesses provide a very different service than public records websites. Public records sites sell contact information and other basic details about individuals. These sites are not authorized to provide employment screening services.

FCRA compliant businesses may legally provide pre-employment background checks. They are authorized to conduct drug screening tests, provide identity, criminal records and verification reports, and offer related employment screening services.

Before you screen an applicant, make sure you’re dealing with an FCRA compliant consumer reporting agency. Otherwise you may be subjected to lawsuits based on regulations that were created to protect the privacy of individuals and ensure that applicants are not denied employment due to inaccurate or outdated information.

Misconceptions Preventing Small Businesses from utilizing Background Screens for Pre-employment

Experts say that about 80 percent of HR professionals use pre-employment background screening. The background screening market is estimated to be worth between two and three billion dollars. Yet many small businesses are still relying on old-fashioned screening techniques such as asking for and following up with references rather than conducting a professional employment background screen. This approach is unfortunately quite outdated and could be potentially hazardous for a small medium business.

The question is why are so many small businesses not doing pre-employment background screens. Most small businesses are thinking that this will cost them an arm and a leg, and see cost as being a major inhibitor. In reality, however, the notion that expert employment background checks are too costly for small businesses is a misperception. If you are willing to outsource your pre-employment background screening it is actually quite affordable, usually no more than $50 per applicant.

Another misconception small business owners may have is that they don’t have the internal expertise to do background checks. Lack of knowledge surrounding background screening is another reason why many small businesses often fail to run employment background checks. Certainly, there is plenty to learn about screening. It could very well take an in-house employee moths to research how to best run background checks. This is why the outsourcing neatly solves this problem. If you’d rather not pay one of you workers to figure out how to screen applicants, you can simply hire a professional pre-employment background screening company to do it quickly and professionally for you. Many of the experts are such screening companies have spent their entire careers learning the best ways to research candidate’s a backgrounds.

Lastly, many small businesses are asking, “What is the big deal? We've never had a problem with hiring new employees before?” Lack of concern from small businesses is a major factor. Some small business owners see background checks as something that only certain fields must carry out. And indeed, until the last decade or so, health care, law enforcement and education professionals were by and large the only workers that were subjected to employment background screens. Today, however, private companies have plenty of reasons to consistently carry out pre-employment background screens such as hiring dangerous individuals, root our lies on candidate’s applications and avoid any legal snafus. Additionally background screens in the long run can end up cutting costs and actually speed up the hiring process.

As you can see there are many different reasons why a small to medium business owner should arrange extensive employment background checks. Instead of trying to do employee screening internally, the wise small business owner will outsource this specialized work to a third party pre-employment background screening company.

How To Read Your Credit Report

Your credit report contains a wealth of information about your financial actions. If you have credit or loan accounts, those accounts, and how you pay them, are included in your credit report. It’s important to review your credit report at least once a year so you know what your creditors are saying about you.

Understanding your credit report can be confusing, especially if you’re reading it for the first time. Here is a breakdown of the types information contained in your report.
PERSONAL INFORMATION ON YOUR CREDIT REPORT
Personal information including your name, address, and place of employment is used to identify you. Previous addresses and places of employment might also be included.

It’s not uncommon to have variations or misspellings of your name. Most credit reporting agencies leave these variations to maintain the link between your identity and the credit information. Having different variations of your name and old addresses won't hurt your credit score as long as it's actually your information. Make sure personal information is identifying you and not someone else.

CREDIT SUMMARY
The credit summary section of your credit report summarizes information about the different types of accounts you have. This section lists the total number, balance, number current, and number of delinquent accounts. It will include the following account types:

· Real estate accounts, any mortgages that you have
· Revolving accounts, like credit cards and lines of credit
· Installment accounts, like loans
· Other accounts
· Collection accounts
· Your credit summary will also summarize the number of accounts you have open, closed, in public records, and the number of inquiries made against your credit within the past two years.

ACCOUNT HISTORY
The account history section of your credit report contains the bulk of the information. This section includes each of your credit accounts and details about how you've paid. Your account history will be very detailed, but it's important that you read through to make sure the information is being reported correctly.

Each account will contain the several pieces of information.
· Creditor name of the institution reporting the information.
· Account number associated with the account. The account number may be scrambled or shortened for privacy purposes.
· Account Type, i.e. revolving account, education loan, auto loan.
· Responsibility. This indicates whether you have individual, joint, or authorized user responsibility for the account.
· Monthly payment is the minimum amount you are required to pay on the account each month.
· Date opened. The month and year the account was established.
· Date reported is the last date the creditor updated the account information with the credit bureau.
· Balance. The amount owed on the account at the time data was reported.
· Credit limit or loan amount.
· High balance or high credit is the highest amount ever charged on the credit card. For installment loans, high credit is the original loan amount.
· Past due. Amount past due at the time the data was reported.
· Remarks are comments made by the creditor about your account.
· Payment status. Indicates the status of the account, i.e. current, past due, charge-off. Even if your account is current, it might contain information about previous delinquencies.
· Payment history. Indicates your monthly payment status since the time your account was established.
· Collection accounts may appear as part of the account history or in a separate section. Where it appears depends on the company providing your credit report.

PUBLIC RECORDS
Public records include information like bankruptcies, judgments, tax liens, state and country court records, and, in some states, overdue child support. Depending on the type of account, a public record can remain on your credit report between 7-10 years. Only severe financial blunders appear in this section, not criminal arrests or convictions. Because public records can severely damage your credit, it's best to keep this section clear.

CREDIT INQUIRIES
Credit inquiries list all parties who have accessed your credit report within the past two years. While your version of the credit report lists several credit inquiries, not all of these appear on the lenders' and creditors' versions. Only "hard" inquiries are shown to lenders. These are inquiries made when a lender checks your credit report to approve your credit application. Your version will also include "soft" inquiries consisting of inquiries made by lenders for promotional purposes.

Deciphering a Background Check: What to Look For

A background check involves investigating a person's employment, criminal and financial history. Although most employers typically want to cut to the chase and see a job candidate's criminal and driving record, there are some practical limitations to these searches.

Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) has been the law of the land in the United States for over four decades.

The FCRA gives employers and HR departments guidelines for navigating background checks, especially as these checks relate to adverse hiring decisions and notifying the job applicant about sensitive aspects of the background check.

How Deep Should a Background Check Be?

That said, the type of job and its attendant responsibilities will usually dictate the scope of the background check that the employer decides on.

In other words, a job at Best Buy will usually require less stringent or deep background checks than a job working with the CIA. Some jobs require a sweeping check of the candidate's credit history, for example, while others do not.

Types of Background Checks

When you go through a third-party background check agency to find out more about a job candidate, you could run into problems with poor record keeping or only a partial collection of the candidate's relevant information.

Background check websites look into the candidate's possible criminal history through courthouse searches, state repositories or nationally aggregated databases. In addition to criminal records, background check services can also provide Driving Records, Employment Verification, Education Verification, Professional References, Drug Testing and more. Most of these background check services have access to many databases that house public information about the individual you want to check out.

What Should You Be Looking For?

Some job applicants can hide things from their potential employers or exaggerate certain aspects of their lives, such as the college they went to.

To keep a handle on all of these applicants, background check agencies conduct as many as 10,000 background checks per day at a cost of around $30 per background check to keep job applicants honest.

Misdemeanor and Felony Charges

Typically a job candidate's possible misdemeanor and felony charges would be something that all employers should inquire about. These records are normally held by the county or state in which the job applicant is from. A full criminal history as part of a background check should be mandatory for most jobs. It’s important however that the employer clearly defines their screen policy. Having a background screening decision matrix that clearly defines acceptable and non-acceptable offenses will help avoid confusion down the road. .

Credit Reports and Bankruptcy Filings

If the position that the employer is considering for a given candidate depends on the employee being especially responsible and good with money, then a background check that includes a full credit history and any bankruptcy filings would be helpful. Many background check agencies only offer this information for a small fee, which might be well worth the cost depending on the position.

Drug Test Results

Approximately a quarter of background checks contracted out to thirty-party background check agencies will conduct a drug test as part of their report.

The drug test is usually carried out in conjunction with a local medical center or clinic. Employers might want to really consider this option.

There are some drawbacks to asking that the background check include a drug test - drug tests can be expensive and might only be relevant for jobs that require operating heavy machinery or complete mental precision.

Driving Record

Any DUI charges or license suspensions would be very relevant information for an employer to take a look at, especially if the job requires operating a vehicle.