If you order background checks through a screening company, you're using consumer reports, and federal duties attach before the order is even placed. Plenty of employers find that out late, when a rejected applicant asks why nobody sent them a copy of the report.
So here's the short answer. A consumer report is information about a person, assembled by a consumer reporting agency and used to help decide whether that person is eligible for something, including a job. When a screening company like KRESS runs your criminal searches and verifications, what it sends you is almost always a consumer report, and the Fair Credit Reporting Act (FCRA) governs how you order it and how you use it.
What is a consumer report?
The FCRA defines the term at 15 U.S.C. 1681a(d)(1). There are three tests, and all have to be met.
- A consumer reporting agency made the communication. Not you, and not a colleague.
- It says something about the person's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living. All seven factors apply to any consumer report, not only credit cases.
- It is used, expected to be used, or collected to serve as a factor in establishing eligibility, for credit or insurance, for "employment purposes," or for any other purpose authorized under section 1681b.
That third test is the one that catches employers out. The FCRA defines "employment purposes" separately, at 1681a(h), as a report used to evaluate someone "for employment, promotion, reassignment or retention as an employee." Promotion, reassignment, and retention put current employees inside the definition, which is why running a check on someone already on your payroll follows the same process as a new hire.
So is a background check a consumer report?
When a screening company supplies it, the answer in almost every case is yes. The hinge is who assembled it. Section 1681a(f) covers anyone who, for monetary fees, dues or on a cooperative nonprofit basis, regularly assembles or evaluates information on consumers in order to furnish consumer reports to third parties, and who uses interstate commerce to prepare or furnish them. A provider you pay to run county criminal background checks, employment verification, or motor vehicle records fits that description.
Your own records aren't a consumer report. Section 1681a(d)(2)(A)(i) excludes a report containing information solely as to transactions or experiences between the person and whoever makes the report, which is where your own file on an employee's attendance and performance sits.
A search you run yourself isn't one either, which isn't the same as safe. If a hiring manager searches a candidate online with no third party involved, the FCRA steps below don't attach, but equal employment opportunity law and state rules still do, and you have no identity-matched record to stand behind. Whether an outside tool that scores candidates for you counts as a consumer report is being litigated now.
What the classification puts on your desk
Four duties follow. Two are yours, and two belong to your provider, though you need to recognize both.
Disclosure and authorization, before the order. Under 15 U.S.C. 1681b(b)(2)(A), the candidate gets a clear and conspicuous written disclosure, in a document that consists solely of the disclosure, and authorizes the procurement of the report in writing. Under 1681b(b)(1)(A) you also certify to the screening company that you've done this, will follow the adverse action steps if they apply, and won't use the information in violation of equal employment opportunity law.
Adverse action, in two steps. Before taking adverse action based in whole or in part on a report, 1681b(b)(3)(A) requires the person intending to take that action to give the candidate a copy of the report and a written description of their FCRA rights. After the decision is final, 1681m(a) requires a second notice naming the screening company with its address and phone number, stating that the company didn't make the decision and can't explain it, and setting out the candidate's right to a free copy within 60 days and to dispute the report. The FCRA sets no federal number of days between the two notices, though some state and city rules do, and the mistakes that get employers sued cluster around that gap. KRESS automates the notice workflow and records every step, which keeps the required sequence for the two notices intact and both dates on the file.
Accuracy, which is mostly your provider's duty. Section 1681e(b) requires a consumer reporting agency preparing a report to follow reasonable procedures to assure maximum possible accuracy. Your part is confirming the record belongs to the candidate in front of you, and keeping written criteria you apply the same way each time. KRESS verifies with real people rather than returning an unreviewed database hit, because the decision resting on that record is yours.
Dispute rights, which run to the provider. Under 15 U.S.C. 1681i(a)(1), a candidate who disputes the completeness or accuracy of an item notifies the agency, which has 30 days to reinvestigate free of charge, extendable by up to 15 more days if the candidate supplies relevant information inside that window. Freeze the decision while a dispute is open, and reconsider on the corrected report.
Before your next order
- Check that your disclosure is its own document, with nothing bundled in except the authorization, which the statute allows there.
- Confirm your authorization names each entity that will procure the report.
- Hold a consistent interval between the two notices, and record both dates.
- Route disputes to your provider the day they arrive, and pause the file.
- Write down your criteria, including what your portal's status labels mean, since terms like "eligible" are industry convention rather than FCRA definitions.
State law sits on top of this and varies by where you hire: some states and cities restrict what can be reported, when you can ask, and how long you must wait, which is why KRESS maintains a state-by-state compliance guide.
This is general information about federal law, not legal advice, and state and local rules can add to it.
Frequently asked questions
What is a consumer report in plain language?
Information about a person, compiled by a company in that business, and used to help decide whether they qualify for credit, insurance, a job, or another purpose the FCRA allows. The Federal Trade Commission's guidance for employers sets out the same framework for hiring.
Is a background check always a consumer report?
No. It depends on who assembled it and what it's used for. A report from a screening company used to evaluate a candidate is one; your own internal record of your dealings with an employee is excluded by 1681a(d)(2)(A)(i).
Does the FCRA apply to checks on current employees?
Yes, where a screening company supplies the report. "Employment purposes" covers evaluating someone for promotion, reassignment, and retention, not just for hire.
If your disclosure form, notice timing, or dispute handling hasn't been reviewed since the day it was set up, that's usually where the exposure sits, and it shows in your own records. KRESS has spent more than 30 years building screening programs that hold up to that kind of review, with 85% of orders completed in 48 hours or less. Talk to a KRESS specialist for a screening workflow review of how your disclosures, notices, and dispute steps run today.
