Key Terms Related to Background Checks
The terms background checks, background screening and background investigations all have the same meaning and are interchangeable dependent on user preference.
Oftentimes the term background check is improperly used to refer to employment background checks. Background checks include two fundamental types of checks, employment and tenant checks.
Pre-employment background screening is becoming much more common in today’s work environment. Employers are increasingly cautious and thorough when making the decision to hire a new employee or even promote a current employee. Some of the reasons that have led employers to conduct background checks include being cautious about hiring people that will work with vulnerable populations, legal requirements, fraud, property and identity theft, violence and workplace security.
According to survey reports from the Society for Human Resource Management (SHRM) upwards of 90% of employers conduct some form of background checks on new hires and the numbers are increasing for employers that conduct infinity screening on existing employees. Some employers even require background checks for contract and temporary positions.
In addition to raising their hiring standards many employers have implemented background checks as one means of gathering information on an applicants’ suitability for a position to increase the probability of hiring the right candidate. Background checks verify the accuracy and validity of information provided by the applicant as well as collect additional relevant information that may be legally considered in the hiring process. Checks help determine a candidate’s character, “fit” for the organization and contribute relevant information to validate that the person possesses the necessary skill, knowledge and competencies.
What is the Fair Credit Reporting Act (FCRA)?
The federal law that regulates the collection, dissemination, and use of consumer information, including consumer credit information. The Fair Credit Reporting Act can be found at, 15 U.S.C. § 1681 et seq. and also electronically at www.ftc.gov.
What is a Consumer?
An individual who is the subject of a background check, often an applicant for employment or tenancy.
What are Consumer Reporting Agencies (CRAs)?
CRAs are entities that collect and disseminate information about consumers to be used for credit evaluation and certain other purposes, including employment.
What’s an Investigative Consumer Report?
An investigative consumer report means a consumer report or portion thereof in which information on a consumer’s character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer reported on or with others with
whom he is acquainted or who may have knowledge concerning any such items of information. However, such information shall not include specific factual information.
What’s a Credit Report1 ?
A Report consisting of an individual’s credit history including, but not limited to, items such as payment history, liens, charge-offs, bankruptcies and other actions as well as outstanding balances held. Credit Reports are prepared by credit bureaus (see links below to the three primary credit bureaus) or their authorized agents and may be contained in a Consumer Report. Credit Reports obtained for employment purposes do not include a (FICO) score, while tenant credit reports may show the (FICO) score. A consumer may contact a credit bureau directly to dispute credit information the consumer believes is inaccurate.
Employment Purposes when used in connection with a consumer report means a report used for the purpose of evaluating a consumer for employment, promotion, reassignment or retention as an employee.
Type of Background Checks (note that these checks are conducted on a country specific basis since legal requirements, court systems and access to records vary by country)
- Criminal and civil record checks at county courthouses, state repositories, federal courts and/or international courts; and the FBI’s criminal database system when mandated by law.
- Driving records checks;
- Drug testing;
- Verification of employment, education, professional credentials;
- Reference checks;
- Vulnerable Population/Registry checks; such as sex offender and child and elder abuse lists;
- Terrorist checks
- Office of Inspector General (OIG) Search and other healthcare sanction lists (U.S. specific);
- Financial Industry Checks, (in the U.S. these include SEC filings, FINRA and Federal Reserve Sanctions; Other countries have their own requirements and sources)
- Credit History (note – an individual’s credit score is not included in a pre-employment screening report);
- Immigration Status/Right to Work (in the U.S. this includes the eVerify process)
- News and Social Media Screening
- Infinity Screening (the process of conducting periodic background checks on current employees to ensure the organization has current information about the employee)
- Tenant screening (the process used primarily by residential landlords and property managers to evaluate prospective tenants. The purpose is to assess the likelihood the tenant will fulfill the terms of the lease or rental agreement and will also take great care of the rental property.)
What’s Adverse Action (related to employment)?
An adverse action is defined as a denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee.
When a background check on an applicant and/or current employee or tenant yields negative results, the following needs to be followed closely.
If an end users reason for deciding not to move forward in hiring or retaining an individual is related to information contained in their background screening report, the requester is bound by the FCRA (Fair Credit Reporting Act) to fulfill their adverse action letter obligations. Likewise, any time that landlords, employers, or lenders make use of a third-party CRA (Consumer Reporting Agency), they are required to remain compliant with the FCRA by delivering adverse action notifications correctly, and in a timely manner.
Pre-Adverse Action – Prior to actually taking Adverse Action, the employer must provide the individual with a copy of the Consumer Report, the FTC document “A Summary of Your Rights Under the FCRA,” and provide an opportunity for the consumer to dispute inaccurate or incomplete information prior to a final decision being made.
Final Adverse Action – Communicating with the consumer or individual that adverse action is being taken (i.e. the individual will not be hired, promoted, etc.), as explained in Section 615 of the FCRA.
What’s Adverse Action (related to tenancy)?
A one-step adverse action process communicating with the individual that adverse action is being taken as explained in Section 615 of the FCRA.
Disclosure to Consumer – In general. a person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer, unless — a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and the consumer has authorized in writing.
Disputed Information – The consumer has the right to dispute inaccurate information in their consumer report. If the completeness or accuracy of any item of information contained in a consumer’s file at a consumer reporting agency is disputed by the consumer and the consumer notifies the agency directly of such dispute, the agency shall reinvestigate free of charge and record the current status of the disputed information, or delete the item from the file, before the end of the 30-day period beginning on the date on which the agency receives the notice of the dispute from the consumer.
End-User2 – An entity (employer, landlord, etc.) that requests a Consumer Report from a Consumer Reporting Agency for a permissible purpose (i.e. employment or tenancy).
Summary of Rights3 – A document prepared by the Federal Trade Commission intended as a resource for individuals which states their rights with respect to Consumer Reports. This document must be provided to an individual anytime the individual receives a copy of his/her report, including those instances where an adverse hiring/tenancy decision is made and a copy of the report must be provided. The official name of this document is “A Summary of Your Rights under the Fair Credit Reporting Act.”
Much of the information in this section was sourced from the FTC.gov (see http://www.ftc.gov/sites/default/files/fcra.pdf) and NAPBS.com.