Employers regularly turn to background screening companies in order to obtain information/reports about applicants and employees. The Fair Credit Reporting Act (FCRA) applies to companies that sell or provide these background screening reports if such a report meets the FCRA’s definition of a “consumer report.” A consumer report is a report which serves as a factor in determining a person’s eligibility for employment, credit, insurance, housing, or other purposes and includes information bearing on an individual’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. Organizations that sell or provide consumer reports to employers are considered “consumer reporting agencies” under the FCRA.

To assist companies that compile background information for employment purposes to understand whether they are considered a consumer reporting agency and thus subject to the requirements of the FCRA, the Federal Trade Commission (FTC) recently issued guidance entitled “What Employment Background Screening Companies Need to Know About the Fair Credit Reporting Act.” In addition to explaining the legal requirements for consumer reporting agencies, the FTC clarified that if you compile a consumer report containing public record information which is used for employment purposes, you still have obligations under FCRA, including notifying the subject of the consumer report or maintaining strict procedures to ensure the accuracy of the public record information.

Importantly, the FTC explained that even if you do not think of your organization as a consumer reporting agency, if you provide information about applicants or employees to an employer, you may be one.