by: John Weltin
Constangy, Brooks & Smith, LLP


My manager has requested that we do a credit check on an applicant before hiring.  The job is Operations Manager – which does have project and overall budget accountability. However, we have not done credit checks on any other positions before.   Is this sufficiently job related to justify a credit check?  If so, is there a release form needed?


First, performing a credit check as part of a background screen is not a discriminatory act – even if the check isn’t performed on each and every applicant.  However, there is a chance that performing the check in this specific instance could be viewed as discriminatory if the company has not done so in the past for similar positions of trust.

The Fair Credit Reporting Act (FCRA) contains several requirements that employers must follow when using an applicant’s credit history as part of any background screening.  The first step is providing the applicant with notice and obtaining his or her consent to the check.  This notice must be in writing, mailed or otherwise delivered, and include a statement that upon request additional information will be disclosed regarding the nature and scope of the inquiry.  Also, this notice cannot be part of the employment application.

The second step happens only if the employer sees something in the report that could impact the hiring decision.  The employer must provide the employee with a notice that includes the credit report used to make the decision  A copy of the FCRA Summary of Rights must be given to the applicant.  The employer must also give the applicant time to review the report for accuracy.

If the offer is to be withdrawn, then the third step requires the employer to engage in the post-report notification process with the applicant.  The post-report notification must be a written, oral or electronic communication to the applicant that contains a written copy of the dated credit report, the name and contact information for the reporting agency, and a statement that the reporting agency did not make the employer’s decision and cannot provide the employer’s reasons for making the employment decision.

In addition to the FCRA Summary of Rights that must be provided to employees during the screening process, the FTC has put together a quick reference guide for employers using credit checks entitled Using Consumer Reports: What Employers Need to Know.    It should be noted that the FTC no longer enforces the FCRA, that duty is held by the newly formed Consumer Finance Protection Bureau – but the information for employers remains largely unchanged as it relates to the FCRA.