Employers conducting background checks that include a credit check are legally required to follow strict procedures outlined in the Fair Credit Reporting Act. Employers must follow 10 steps including providing written disclosure of intent and getting permission to proceed. The law protects the rights of job applicants and employees.
Employers intending to do a credit check as part of the hiring process must state so in writing by providing a full explanation of the process. All background checks must include an authorized signature from the applicant or employee before she can be submitted to the Credit Reporting Agency. Some employers send this information to a screening company that handles background checks. Depending on the state, employers may be legally prevented from obtaining credit checks for certain types of jobs. Job applicants and employees can check state laws concerning these restrictions.
Background check reports typically include credit history and information from public criminal and civil records. After the employer receives the report, an applicant or employee is entitled to see it upon request. By law, employers must send a notification about any adverse actions taken as a result of a background check. An example of an adverse action is a decision not to hire an applicant. A decision to fire an employee also requires adverse action notification.