How to Handle FCRA Electronic Disclosure and Authorization Forms

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Electronic Disclosure & Authorization Forms

Employers who will be conducting background screenings on job applicants or current employees are required under the FCRA (Fair Credit Reporting Act) to issue a Disclosure and an Authorization form as a part of their standard business practice. This is law under the FCRA. The Disclosure and Authorization forms may be used in either an electronic or paper format. For the purposes of this blog, we are focusing on the electronic version. The FCRA specifically states that employers are required to provide a clear written disclosure form to all employees by informing them that a consumer report/background check may be obtained for employment purposes. In addition, the FCRA requires that employers obtain the consent (authorization) of the potential or current employee before performing the background check.

Common Use

While many people believe electronic Disclosure and Authorization forms are mainly used for banking purposes, these forms are also critical legal documents used during the hiring process and other HR processes. Most companies have policies and procedures in place to obtain a consumer report on potential and existing employees. Consumer reports are used to assess if there is any adverse risk that a potential employee might impose on the company. Once the signed Authorization has been submitted by the candidate/employee, an employer is free to gather a consumer report on that individual.

Is It Better To Use Electronic Forms?

Using electronic Disclosure & Authorization forms provides the employer the ability to “lock-down” content so that the verbiage or forms cannot be manipulated. This option gives companies a sense of better control of their forms and can be easily saved without the need for paper and/or scanning of the assigned forms. The question is subjective as to whether electronic is better than paper…each employer must decide what format works best for them.

Why Are These Forms Important?

If you’ve made it this far, you’re probably wondering why these forms are important. Well, the Disclosure and Authorization forms are important because the FCRA prescribes that these forms must be used by employers seeking consumer reports on potential or current employees. If employers are actively seeking consumer reports on job applicants and/or existing employees and are not using the Disclosure and Authorization forms, the employer is in violation of the law and risks fines by the FTC and potential lawsuits by the affected consumers. To ensure you are protecting your company, it is imperative that you use these legally approved forms.

Conclusion

The FCRA Disclosure and Authorization forms are critical legal components in the background screening process of potential and current employees.  Information learned from each background report is vital data that assists HR professionals and hiring managers in making good hiring decisions. Validity always recommends that each employer seeks out legal counsel in the creation and final approval of its specific Disclosure and Authorization documents.

For more information on this subject matter, we suggest the following resources:

• The FTC’s Guide to Using Consumer Reports

*The contents of this blog are not legal advice and should not be relied upon as such.