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Balancing employment due diligence, fair-chance laws and safe-hiring practices may seem like a high-wire act but it can be done, and the best way to walk the wire from the search point to the successful management of human resources is through the use of a responsible CRA; that is, a consumer reporting agency. This section explains why a CRA is your safe course of action for hiring and housing and dealing with incumbents’ issues.
We can begin with one fact: not all background screeners are created equal.
In fact, there are those that comply with the FCRA and fair-chance laws, and those that don’t; and those that are dedicated to employment or housing screenings; while most just simply sell information to anyone ready to pay for the “service” with no questions asked except for the credit card number.
Oftentimes the low priced vendor’s attractive offering is possible because the source of the search is also substandard and the vendor’s overhead is minimal, lacking in research staff, compliance procedures or robust sources.
Such vendors may do for checking up on friends or a potential date but not for serious, regulated processes such as employment and housing.
In fact, there are ... [screening companies] that comply with the FCRA and fair-chance laws, and those that don’t; and those that are dedicated to employment or housing screenings; while most just simply sell information to anyone ready to pay for the “service” with no questions asked except for the credit card number.
So, what can you expect to get when you order a background check? One of three outcomes:
An unfiltered dump from a vendor that provides you with too much may well attribute inaccurate or erroneous information to the applicant. If you need to comply with the FCRA or fair-chance laws this could set you up for a legal challenge based on receiving information you may not use for a hiring or housing decision. Your claim that a negative decision was not based on information appearing on a report you received will probably be ineffective. If you receive it, it is likely to be considered to have been a part of your decision whether or not it was.
A rudimentary search from a cheap vendor could provide you with too little or no information when in fact there is more to be discovered. This outcome could result in an unsafe hire or housing situation. That too could have ultimate legal repercussions from those affected by an improper due diligence.
An FCRA-compliant search is one in which the CRA (a) reviews the results, (b) filters out information that is ineligible because of age or irrelevancy, (c) further reviews original sources when necessary to complete the record through adjudication, and (d) releases to the client a curated, FCRA-compliant report. In this scenario the decision maker can easily prove he or she based the decision only on permissible information by producing the report used. In fact, the applicant will have been provided a copy in the course of the onboarding process, per FCRA requirements. If challenged with a claim that an applicant’s opportunity for employment or housing was improperly denied, the claim is countered with the FCRA-compliant report.
The last, foregoing point is the reason many employers and property managers are already using a CRA to screen their candidates. It gives them a safe process for complying with Fair Chance, Fair Credit, Civil Rights and EEOC requirements. Following are some of the better arguments for using KYC Solutions:
Comprehensive and accurate information. A background check can start with a “comprehensive” multi-state or nationwide search. (Of these only the FBI AIFIS rap sheet is truly comprehensive and nationwide.) But such a report should be considered a lead generator and not a final product. We use that to drill down to original source files for the most complete criminal data in local, state and national jurisdictions. We also assure that impermissible information is filtered out and that it is accurate and up-to-date.
Customized screening solutions. KYC Solutions has the staff and resources to create as many customized solutions as our clients need—no more and no less—not a one-size-fits-all report. Our clients don’t need to spend time and energy sifting through irrelevant findings.
Compliance assistance. Both KYC Solutions and our clients must be and remain compliant with the FCRA and fair chance laws that may be applicable. Our professionals work with the laws daily and are available to the client or their staff for guidance and training.
The FCRA spells out how consumers’ financial information can be collected, held and disseminated and how that information can be used. Among other uses, the FCRA permits consumer information to be used for “employment purposes,” but a specific process is required. Here we explain the FCRA features that are relevant to employment and housing.
To be compliant, we must observe the following time limitations that the FCRA places on various records:
KYC Solutions has a process designed to keep you FCRA-compliant while making use of the information that the FCRA does permit decision makers to have. The following points are part of our process:
We provide the Disclosure and Authorization forms you must provide to your subjects. These must be separate documents from your internal work or rent applications.
We provide training and guides like this User’s Guide, as necessary, and we are always available for consultation if you have questions.
We filter out prohibited findings from our reports to you, the client/user, so you do not receive or become aware of them and you make decisions only with information you are allowed to use. The absence of prohibited information in your system protects you.
The last point is very important for our clients (the users of consumer reports) because this practice allows you to reach decisions to take adverse actions purely with information you have lawful access to and can use for your onboarding process.
Should an applicant decide that your adverse decision (to not hire) was not for the reason you gave but because of some incident in the subject’s past, you will have the KYC Solutions consumer report that will have documented evidence that only the history permitted by law was used in reaching your decision.
The FCRA is clear about the conditions under which consumer reports may be used for “employment [and tenancy] purposes.” They are as follows:
1. Certification from users (decision makers) to us, the CRA, that —
a. users have (or will) provide a “clear and conspicuous disclosure to the consumer” (applicant or incumbent) before reports are procured or caused to be procured; and,
b. information from consumer reports will not be used in violation of applicable laws.
Note that each one of our clients meets the FCRA’s “certification” criteria during our “client onboarding” process. It is then that we and the new client complete and discuss required certifications, statements and agreements to begin your FCRA-compliant program with KYC Solutions.
In contrast, many budget-conscious businesses get consumer reports through inexpensive information vendors who willfully or unwittingly ignore laws, or they generate unfiltered consumer reports themselves by performing the research themselves directly with government systems and from Internet sources.
Using reports that include information prohibited by law, or using any information outside the FCRA Compliance Process exposes the organization to civil and criminal penalties. Potential violations usually come to light when a consumer files a complaint with a government body, like the Federal Trade Commission (FTC), a consumer files a lawsuit, or a breach of the organization’s data becomes known.
“’Users’ of ‘consumer reports,’ as defined in the FCRA, are ... the personnel of employers (or property managers) who look at the totality of information gathered about applicants and who use these reports to adjudicate the hire/no-hire or rent/no-rent decision. Consumer reports are confidential by law and may not be distributed to third-parties or for any other purpose.”
2. Disclosure before initiating a consumer report. Disclosure before initiating a consumer report. There are two steps to take before actively beginning a background investigation. The end-user/client (or KYC Solutions) must—
a. provide the applicant in oral, written or electronic form—
i. a summary of his/her rights; and,
ii. a notice that the applicant (incumbent) is entitled to a copy of the consumer report when it is produced; and,
b. receive from the applicant a signed, written authorization for a consumer report (background investigation).
The law permits applications “by mail, telephone, computer or other similar means” only if the position applied for is subject to qualifications and maximum hours that are regulated by the U.S. Secretary of Transportation. This exception is so rare and specific that it is not within normal practice. KYC Solutions and its end-users work through normal procedures.
Oral notifications are highly discouraged. But if an oral notification cannot be avoided it should immediately be recorded as a memorandum and placed in the consumer’s file, and a copy forwarded to the applicant through a verifiable communication, like a facsimile transmission or a receipt-generating email. This assures compliance in a verifiable way.
3. Adverse Actions.
a. Before taking any adverse action, the user/adjudicator must provide the applicant (or incumbent)—
i. a copy of the consumer report; and
ii. a written description of the applicant’s rights.
In this preliminary stage of adjudication the user provides the applicant an opportunity to review the report and provide any mitigating explanations, or point out errors or inaccuracies the report may have.
Mitigating explanations or corrections provided by the applicant are best provided in writing. Responsibility for getting errors or inaccuracies corrected at their origin falls on the applicant as consumer reports only reflect what is in databases.
The length of time applicants are given to respond to pre-adjudication questions or concerns will vary with different users/ adjudicators but a limit of five days is usually considered reasonable.
“In ... adjudication the user provides the applicant an opportunity to review the report and provide ... explanations, or point out errors or inaccuracies... Mitigating explanations or corrections provided by the applicant are best provided in writing... five days is usually considered reasonable.”
b. Adjudication finalizes this phase. End-users must review an applicant’s (or incumbent’s) file, consider the veracity of the individual, and make a decision based on the totality of the information at hand. Consideration should be given to and recorded in writing—
i. whether the negative issues impact on the opportunity in question,
ii. the recency of negative issues,
iii. the seriousness of the negative issues,
iv. mitigating circumstances, and,
v. positive, counter-balancing characteristics or traits.
c. Action. Adjudication will result in a go or no-go decision; that is, hire or not hire, retain or discharge, rent or not rent, retain or evict, lend or deny loan, etc.
i. If the decision is to accept the applicant, then the usual next step is enrolling, processing and training the newcomer, or retraining in the case of an incumbent.
ii. If, after this process the consensus is to deny the opportunity to the applicant, then provide a written letter explaining the reasons for denial (or dismissal). Typical adverse actions include the following: a denial of employment; a denial of promotion; a demotion; a reassignment; a denial of housing, purchase or rental; or an eviction.
Besides the FCRA, which is enforced by the FTC and the Consumer Financial Protection Bureau (CFPB), there are other laws enforced by the Equal Employment Opportunity Commission (EEOC) that also affect employment and tenancy processes and decisions.
Although not a part of the FCRA, and they do not affect KYC Solutions’ consumer reports, we include the following list of other related laws you should be aware of:
These laws prohibit discrimination on the basis of race, color, sex, religion, national origin, age, disability, genetic information, or as retribution for opposing discrimination or for seeking legal recourse (while the FCRA protects individuals from financial discrimination or injustices).
Businesses that employ 15 or more persons should also be mindful of these laws when processing and adjudicating applicants.
Know Your Customers & Crew
