The Fair Credit Reporting Act


The following is an overview of the Fair Credit Reporting Act prepared by Imperative for our clients’ quick reference. This is not a comprehensive review of the FCRA nor should it be taken as legal advice.

The Fair Credit Reporting Act (FCRA) is a federal law administered by the Federal Trade Commission and Consumer Financial Protection Bureau. The majority of this act governs the reporting of consumer’s’ credit worthiness. However, employment background investigations, including those where no credit report is involved, are also considered consumer reports and are governed by this act.

The FCRA provides employers conditional immunity from legal actions concerning libel, slander, and invasion of privacy when they provide or receive information from Imperative. Therefore, it is important that FCRA-required procedures be followed whenever information is requested from Imperative for employment purposes.

Some states, most notably California, have their own versions of the FCRA which extend the protections provided to applicants and employees. Employers should always consult with their legal counsel about the laws specific to the states in which they operate.

Also, Imperative president Mike Coffey conducts free webinars covering the FCRA, Title VII, and other topics on a regular basis. You can review the schedule of upcoming webinars on our website.

Finally, if you have questions about the FCRA or any compliance issues, please don’t hesitate to call us at toll free 877-473-2287.


The FCRA uses terms that may seem unfamiliar to employers. In the context of employment background investigations, the following definitions apply:

  • Consumers are people (applicants and employees) on whom background checks are requested.
  • Consumer reports are the background investigations on applicants or employees.
  • Consumer reporting agencies (CRAs) are background screening firms like Imperative.
  • Adverse employment actions are those that negatively (from the perspective of the consumer) impact an individual’s hiring, terms of employment, promotion, or retention.

Before Requesting an Employment Background Investigation

The first FCRA requirement is that each consumer about whom information is requested must be notified, on a separate document used exclusively for that purpose, that a background investigation will be conducted in relation to his or her employment. The consumer must also provide written permission to the company to procure the background investigation. Both of these requirements are met when the consumer completes Imperative’s suggested Consumer Report Disclosure Form.

Before Taking Adverse Action Against the Individual

When information provided by Imperative may, in whole or part, adversely impact an consumer’s employment (e.g., they may not be hired, they may be terminated or demoted, etc.) the employer must provide the following to the consumer prior to making the employment decision:

  • A copy of the employment background investigation report, and
  • A copy of the document entitled A Summary of Your Rights Under the Fair Credit Reporting Act.

This is normally called the pre-adverse action notice.

After Taking Adverse Action Against the Individual

The FCRA requires a second notice be given to the consumer if, based in whole or part on the information provided by Imperative, any adverse employment action is taken relative to the individual’s employment.

Normally simply called the adverse action notice (we often call it the post-adverse action notice), this second notice may be written or oral, although Imperative recommends it always be written. Although it must be a separate notice from the first notice, the federal law does not prescribe a minimum time that must elapse between the two notices. In some cases, particularly in instances involving current employees, the pre-adverse action and adverse action notices can be made in the same meeting.

Imperative’s web-based report management system will generate both notices for our clients, ensuring that the consumers receive the right information every time.

Some clients prefer that Imperative make the necessary pre-adverse and adverse action notices on their behalf. When we do that, we send the pre-adverse action letter both regular mail and certified mail. This way, we have a record that the letter was delivered but delivery isn’t delayed if the consumer has to go to the post office (perhaps on the weekend) to pick up the letter. We send the adverse action letter via regular mail.