The Fair Credit Reporting Act, usually shortened to the FCRA, is the federal law that governs consumer reports: the credit and background files that bureaus and screening companies sell for hiring, lending and insurance decisions. The Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB) and other agencies can enforce it, and individuals can sue. This page is for owners of small businesses and practices who run, or may run, background checks on applicants or staff.
Who is covered
| Who or what | When it applies |
|---|---|
| Employer or other user | Gets a report from a consumer reporting agency (a business that regularly compiles consumer information to furnish reports, usually for a fee) to evaluate someone for hiring, promotion, reassignment or retention; no employee-count test |
| Contractors, volunteers | FTC staff (2011) reads "employment purposes" broadly and says the law may reach them; a staff view, not a rule |
| Not a consumer report | An employer's own first-hand records are not consumer reports; reports from outside misconduct investigations have a separate notice rule |
| Disposal Rule | Any business under FTC jurisdiction holding consumer information for a business purpose; no size test |
| Red Flags Rule | Only financial institutions and creditors with covered accounts; billing clients after service, by itself, does not make a business a creditor |
| Illinois credit-history law | Any entity that lets even one person work or takes applications; banks, insurers and debt collectors, among others, are excluded |
| Illinois criminal-history timing law | Private employers with 15 or more employees this or last calendar year |
How it touches your taxes and payroll
A firm that hires staff and orders reports is itself a user under the FCRA. Tax preparers count as "financial institutions" under the FTC Safeguards Rule, and the Disposal Rule lists building report disposal into that written security program as one example; see GLBA and HIPAA. Pulling a client's credit report needs a permissible purpose, such as the client's written instruction. A job with access to information the Illinois Employee Credit Privacy Act narrowly defines as "personal or confidential" or "financial" is one of its listed credit-check situations; whether a job qualifies is a legal call.
Next, read the rules and numbers or the checklist and FAQs. Related laws: Title VII, the Illinois Human Rights Act and the Illinois Personal Information Protection Act.
Official sources
- Federal Trade Commission: Using Consumer Reports, What Employers Need to Know
- U.S. EEOC: Background Checks, What Employers Need to Know
- Cornell Law School: 15 U.S.C. 1681b, employment use of consumer reports
- Illinois General Assembly: Employee Credit Privacy Act, 820 ILCS 70/10
This page is a plain-language summary. The official source controls if there is any difference.