HR Guide to Compliant Screening: Federal vs. State FCRA regulations

3 min read
Fri, May 20, 2016


The Fair Credit Reporting Act is meant to protect applicants against unfair hiring decisions based on results of their background checks. Most employers are aware of the federal FCRA regulations that they must follow during hiring procedures. Some states have also passed their own FCRA laws and employers must understand which of these laws affect the screening and hiring of certain applicants. 

Application of federal versus state FCRA regulations is dependent on many factors.

Federal FCRA Regulations

Pre-employment screening is of vital importance to employers in selecting the right person for the job, avoiding negligent hiring claims and saving both time and money in turnover costs. To stay within federal FCRA guidelines, employers must adhere to the following:

  • Applicant consent and authorization to a background check. - Employers must disclose that they will be screening and applicants must give consent to the screening as part of the hiring practices of the business.
  • Summary of Rights - Candidates must be given "A Summary of your Rights under the Fair Credit Reporting Act" document.
  • Adverse Action Procedures - Adverse action includes pre-adverse action when the employer is considering a negative action (no hire, termination or no promotion) based on the results of the background check. The applicant will then have time to review and dispute the report. An adverse action notice is sent to the candidate if the decision is not disputed.

Federal FCRA compliance is complex enough. VeriFirst's FCRA staff is available to help. Reach out to us with your questions or read further to see how state regulations affect your hiring process as well.

Contact VeriFirst

State FCRA Regulations

There are several states that have passed their own FCRA regulations. In 1996 however, the FCRA was amended to preempt state laws and prohibits enacting statewide FCRA rules after September 30, 1996. The states that have passed FCRA laws are regarding such things as:

  • Whether or not bankruptcies are allowed to show on credit reports
  • Arrest records and convictions and whether they show after a certain period of time
  • Whether or not collections or tax liens show after a specific period of time (Some states only allow these items to show if they are above a certain amount of money. The amount specifics depends on the state.)
  • Annual salaries of the employees (For instance, some items may be allowed on the credit report if the employee salary is above a certain level. Again, these salary specifics differ by states).

Whether or not to apply the state FCRA rules depends on the state in which the applicant resides and the state in which the employer does business. Some states that have passed laws that must be applied in hiring include:

  • California
  • Colorado
  • Hawaii
  • Kansas
  • Kentucky
  • Maine
  • Maryland
  • Massachusetts
  • Montana
  • Nevada
  • New Hampshire
  • New Mexico
  • New York
  • Texas
  • Washington

Applying Federal vs State FCRA Regulations

With so many different regulations and dependencies, employers can become quickly overwhelmed during the already complex hiring process. Best practices dictates that a hiring manager must look at where an applicant lives and where the employer is located before showing the results of the background check. At that point, the best option is to use the strictest FCRA regulations of the two.

  • Review applicant's criminal record reporting
  • Follow FCRA at federal level
  • Follow FCRA at state level
  • Consider salary exemptions
  • Review credit transaction values

Work with an Experienced Partner

There is an overwhelming amount of information for a hiring manager to comprehend in order to stay FCRA compliant at both the federal level and the state level. We understand because we do it every day. You don't have to do it alone. Let VeriFirst be your partner during your hiring process. We can run employment background checks and help your organization's hiring process comply with the regulations. Click the green button below to work with our FCRA staff.

See How VeriFirst Performs  Background Checks and Drug Screening

Get Email Notifications