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What is an Adverse Action letter?

When an employer intends to not hire an employment applicant due to non-conforming results of a background check, the employer must provide the applicant an opportunity to dispute the findings. It is also referred to as “Fair Chance Employment Opportunity”.

FCRA background checks complianceIn order to comply with the Federal Fair Credit Reporting Act (FCRA), an employer has the legal responsibility to provide an employment applicant with an adverse action notice of their rights under FCRA laws if the employer resolves to not hire, promote, retain or reassign the applicant based on the results of the background check report. This two-step process provides the applicant with a fair opportunity to dispute any incorrect or incomplete information.

The Adverse Action process is as follows

1. Provide the applicant with a pre-adverse action letter that includes a copy of background check report and “A Summary of Your Rights under the Fair Credit Reporting Act”
2. Allow job applicant a reasonable amount of time to contact Consumer Report Agency (CRA) if the applicant would like to dispute any negative information they deemed incorrect and that may have had a role on a non-hire decision
3. Finally, provide an adverse action letter if a final adverse employment decision is to be made.

You can automate this task within your secure account. Our system can generate a pre-populated letter that includes FCRA wording requirements along with a copy of the background report so that you can print and mail to your employment applicant. Priced at $5.00 per letter.

Sample Pre-Adverse Action Letter | Sample Adverse Action Letter

The question that arises is how long an employer must wait before denying employment based upon information contained in a Consumer Report. The Fair Credit Reporting Act is silent on this point. However, many legal authorities advise that an employer should wait a reasonable period of time before making the final decision. According to an opinion letter from the Federal Trade Commission (FTC), a minimum period of five business days would be reasonable, although an employer may consider a longer period just to be on the safe side. This period should be the time that would be needed for an applicant to meaningfully review the report and make known to the employer or the Consumer Reporting Agency any inaccurate or incomplete information in the Consumer Report. A Consumer Reporting Agency should be able to assist employers in complying with these requirements. This does not mean that an employer is required to hold the job open for a long period of time. After the first notice is given, and the applicant has had an appropriate opportunity to respond, an employer may either wait until there has been a re-investigation, or fill the position with another applicant.

An additional form can also be sent with the pre-adverse action letter if an employer plans on instituting a procedure for an “Individualized Assessment.” This follows a best practice recommendation by the U.S. Equal Employment Opportunity Commission (EEOC) in their updated Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964 issued on April 25, 2012

Many employers find it difficult to believe that Congress intended that an applicant be notified twice, both before an adverse action and after. However, the law clearly requires two notices. This is also the interpretation of the Federal Trade Commission Staff. The purpose is to give job applicants the maximum opportunity to correct any incomplete or inaccurate reports that could affect their chances of employment.
Source: ERS Check

What is The Fair Credit Reporting Act (FCRA)

The Federal Fair Credit Reporting Act is the main law for consumers and companies as it relates to the credit reporting system we have here in the United States. It not only protects consumers by specifying their rights, but it also lists the responsibilities of companies who collect the credit information, distribute the credit reports, and use the information.

In general, the Fair Credit Reporting Act covers more than just credit reporting companies such as credit bureaus. It now defines and covers all consumer reporting agencies that gather, retain, compile, issue, and use credit reports, insurance reports, employee background reports, tenant screening, bank bad check and overdraft reports, and other consumer reports based on consumer reporting information such as consumer credit experiences, court records, and other personal consumer information.

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