What’s the Difference Between State and Federal FCRA Laws?

Background screenings are often complicated enough without even considering state and federal regulations around consumer protections as part of the hiring process. However, the federal Fair Credit Reporting Act (FCRA) and FCRA laws are essential considerations as employers move through background screenings.

Navigating federal laws is further complicated by state laws that may add to those consumer protections. In brief, those state laws are typically more specific than the federal act, providing credit reporting agencies with additional limitations in screenings. Without attention paid to both, employers leave themselves open to potential lawsuits by employees affected by adverse actions. 


What is the FCRA?

Understanding the FCRA can be challenging but critical to make sure a company is background check compliant. 

So what is the FCRA?

The federal FCRA was passed to protect consumers against adverse actions by consumer reporting agencies and allow for more transparency on consumers’ end over their credit scores. The federal act also provides for recourse by consumers for reporting that is out of date or inaccurate. 

There are several areas of importance as they relate to background screening in particular: 


  • Employers may only perform background checks with express permission from the prospective employee to do so. That permission usually comes in the form of written consent, preceded by information in writing, that a background check is a component of the application process. Put more simply, an employer can’t just decide to perform a background check without letting that applicant know.
  • Any adverse action notices — such as a loss of employment opportunities, even firings — taken from a background check report must be disclosed to that prospective employee. 
  • Before adverse action, employers must provide copies of the report to that prospective employee along with a summary of their rights under the FCRA. This should coincide with a pre-adverse action letting the applicant know of steps being taken due to the screening.
  • Prospective employees have the right to dispute any information in resulting reports that they believe to be inaccurate or incomplete by contacting the agency that conducted the screenings directly. The prospective employer must provide accurate and complete contact information for the screening agency to make information-gathering easier on the applicant.
  • The agency conducting the screenings must then investigate whether that dispute from the prospective employee has merit and correct or delete information proven wrong. Any subsequent reports must include the updated information if there is any.

Prospective employees who have been the victims of identity theft or active military personnel have rights on top of those described above. This is all on top of additional state rules and regulations outside of the federal act.

The FCRA vs. State Laws

Some states have enacted stricter regulations on top of the federal FCRA, using the federal version as a broad guideline to work off when passing their acts. The reasons vary for the state versions, from a need for more specific processes or to address state-specific areas of concern. 

Some states have higher bankruptcy rates, for example, and may seek remedies for consumers in that area. Others may feel additional protections are warranted for those who have criminal records. 

There are over 20 states that have their versions of the FCRA. State laws are there to give an added layer of protection to consumers. In the case of employers, a good rule of thumb is to follow the regulations that offer their prospective employees the most protection. 

In California, for example, the Investigative Consumer Reporting Agencies Act (ICRAA) takes precedence over the federal law in areas where more protections are offered to the consumer. 

On top of the broad protections offered by the federal FCRA, the California version is more specific about the kinds of information a reporting agency may seek about a prospective employee. Under both that state’s law and employer best practices, it is always prudent to obtain written consent for any additional background checks that follow an initial pre-screening.


Navigating FCRA Laws

It can certainly be challenging to navigate FCRA laws, especially if you are working within a state that includes additional local provisions on top of the federal act. However, finding the right background screening partner can simplify your screening processes tremendously and allow you to move through the hiring process knowing that any background checks are legal and compliant, with the prospective employee’s best interests in mind. 

DataCheck is in the business of providing federally compliant employee screenings that keep employee privacy in mind while ensuring background checks are as accurate and thorough as possible.

If you’re unsure how to navigate federal and state regulations in your hiring or onboarding policies, contact DataCheck. We’ll work with you around not only conducting sound screenings but giving you additional tips in your hiring processes.