You’re hiring, and you know you need to run a background check, but what does that really involve? If you’ve heard the term “FCRA background check” thrown around, but you’re not 100% sure what it means, you’re not alone.
The Fair Credit Reporting Act (FCRA) is a federal law enacted in 1970 that governs how consumer reports—including employment background checks—are collected, used, and shared by third-party consumer reporting agencies (CRAs). For employers who use CRAs to screen job candidates, complying with the FCRA is critical, not just to avoid lawsuits and fines, but to ensure a fair, transparent, and legally sound hiring process.
At Certn, we’ve helped more than 20,000 organizations, from scrappy startups to global giants like Interac and Deloitte, navigate compliance complexities, including the requirements for FCRA-compliant screening. We’re not new to this. Since 2016, we’ve delivered fast, accurate, and fully compliant background checks. Our AI and automation-powered platform removes the friction from hiring without cutting corners, giving HR teams peace of mind and candidates the respect they deserve. When it comes to background checks, we’re the friendly experts who make trust move faster.
While Certn’s FCRA Requirements for Employers outlines the broader obligations, one of the most critical and commonly misunderstood parts of the FCRA compliance is following the adverse action notice requirements. If you decide not to move forward with a candidate based in whole or in part on information in their background check report, such as a criminal record, credit history, or another flagged item, the FCRA legally requires you to follow a specific set of steps.
In this blog post, we break down what those steps look like, from issuing a pre-adverse action notice letter to making a final decision, and explain how following them can help protect your organization from legal risk and promote fair, transparent hiring practices.
Let’s get started!
What is an Adverse Action Notice?
An adverse action notice is a formal notification that informs a job applicant, employee, or tenant that a decision with potentially negative consequences has been made based on the results of a background check or other consumer report. This required notice exists to ensure transparency and give individuals a fair opportunity to respond.
Common examples of adverse actions our HR clients may see include:
- Rescinding a job offer
- Denying a promotion
- Terminating employment
Under the FCRA, employers must issue an adverse action notice when a decision is influenced, in whole or in part, by information from a background check report. The notice must be delivered as part of a multi-step process that gives the individual time to review the report and dispute any inaccuracies before the decision becomes final.
This process helps safeguard against decisions based on outdated or incorrect information, which can otherwise unfairly impact someone’s employment opportunities. While it might not seem obvious, in this way, the adverse action notice plays a critical role in protecting individuals’ rights and ensuring the hiring process remains fair, compliant, and based on accurate data.
Frequently Asked Questions About Adverse Action Notices
What is an adverse action in hiring?
An adverse action is any decision that negatively affects a candidate based on information from a background check, such as rescinding a job offer or denying a promotion.
Is an adverse action notice required by law?
Yes. Under the Fair Credit Reporting Act (FCRA), employers must follow a specific process when taking adverse action based on a consumer report.
How long should I wait after sending a pre-adverse action notice?
While the FCRA doesn’t specify a time period, a standard best practice is to wait at least five business days before issuing a final decision.
What Are the Key Adverse Action Notice Requirements?
The adverse action notice requirements are specific procedures mandated by the FCRA to protect the rights of individuals undergoing background checks. They’rre aiming to protect the individual’s rights and ensure that decisions are made fairly and transparently.
Here’s a breakdown of the key adverse action notice requirements:
1. Provide a Pre-Adverse Action Notice
Before making any final decision, you must issue a pre-adverse action notice. This initial notice informs the individual that you are considering taking an adverse action based on the results of a background check.
The pre-adverse action notice must include:
- A copy of the background check report used in the decision-making process
- A copy of A Summary of Your Rights Under the Fair Credit Reporting Act
This step gives the individual a chance to review the report and, if necessary, dispute any incorrect or incomplete information before a final decision is made.
2. Wait a Reasonable Period
After issuing a pre-adverse action notice, you must allow a reasonable period for the individual to respond. While the FCRA doesn’t specify an exact timeframe, most employers observe a waiting period of at least five business days before taking the next step. This window gives the individual a fair opportunity to correct inaccuracies.
During this period, you shouldn’t proceed with any final decision based on the background check report. If the individual files a dispute, the adverse action process must be paused, and no final decision can be made until the CRA completes its reinvestigation and provides the updated results.
3. Issue the Final Adverse Action Notice
If the individual doesn’t dispute the report, or if the dispute is resolved but the adverse decision still stands, you must then issue the final adverse action notice. This final notice must include:
- The name, address, and phone number of the consumer reporting agency (CRA) that provided the background check report;
- A statement that the CRA did not make the decision and cannot explain why the adverse action was taken;
- A reminder of the person’s right to request a free copy of the report within 60 days; and
- A notice of the right to dispute the accuracy or completeness of the report with the CRA.
Certn offers ready-to-use sample letters and forms for adverse action to help you meet adverse action notice requirements with ease. Following these adverse action notice requirements is not only a legal obligation, it’s a vital safeguard that ensures individuals are treated fairly when background check results influence employment decisions.
Why Are Adverse Action Notice Requirements Important?
Failing to comply with the FCRA adverse action notice requirements can lead to significant legal and reputational consequences for employers. As we’ve said throughout, these requirements are not mere formalities; they’re essential steps to ensure fairness and transparency in employment decisions influenced by consumer reports.
Numerous companies have faced class-action lawsuits for neglecting these obligations, resulting in substantial legal settlements. For example, recently Walgreens agreed to settle a lawsuit alleging it violated the FCRA by failing to provide proper adverse action notices before rejecting applicants. The lawsuit claimed that Walgreens sent email notifications that didn’t meet legal requirements. The settlement applies to individuals who applied for a job at Walgreens between March 30, 2020, and May 17, 2022, and were denied employment based on a criminal background check. Eligible applicants could receive up to $918 in compensation.
Fair and Responsible Hiring Practices
From an ethical standpoint, following adverse action notice requirements reinforces fair and responsible hiring practices. It ensures that applicants aren’t dismissed without being informed of the reasons behind the decision and gives them a meaningful opportunity to review and respond to the information in their background check reports.
This transparency is critical because a background check can sometimes contain inaccuracies or outdated data. By allowing individuals to correct errors or provide context, employers not only uphold fairness but also help protect applicants from being unfairly penalized. Ultimately, adhering to these requirements fosters trust, promotes accountability, and demonstrates a commitment to equitable treatment in the hiring process.
Adverse Action Notice Steps Explained
Implementing a compliant adverse action notice process is straightforward if you follow a consistent and well-documented procedure. Here’s how it typically works:
Step 1: Order a Background Check
Partner with a reputable CRA like Certn to request the candidate’s background report.
Step 2: Review the Results
Carefully evaluate the report to determine whether any historical information—such as a criminal record or credit issue—could influence your decision not to proceed.
Step 3: Send Pre-Adverse Action Notice
If you’re considering an adverse decision, provide the candidate with a pre-adverse action notice. This must include a copy of the background report and a summary of their rights under the FCRA. Allow at least five business days for the individual to review and respond.
Step 4: Handle Disputes (If Applicable)
If the candidate disputes any part of the report, the CRA is required to reinvestigate and issue an updated report. No final decision should be made until this process is complete.
Step 5: Send Final Adverse Action Notice
Once the waiting period has passed and any disputes have been resolved, you may proceed with your decision. At that point, issue a final adverse action notice to formally conclude the process, as required by law.
FCRA Adverse Action Notice Requirements: What Employers Must Include
To ensure full compliance with adverse action notice requirements, consider these best practices:
- Document Everything: Keep clear records of each step in the process, including notices sent and responses received.
- Train Your Team: Make sure your TA team understand FCRA requirements, pre-adverse action, and how to handle disputes.
- Stay Updated: Monitor changes in local, state, and federal laws that may impact your background check procedures.
- Use Trusted Screening Providers: Work with CRAs like Certn that understand legal requirements and offer automation to reduce manual errors.
- Prioritize Transparency: Clearly communicate the background check process and potential next steps to all candidates.
With growing scrutiny around data usage, privacy, and hiring discrimination, it’s more important than ever for employers to adopt compliant and transparent hiring practices. Failing to do so not only exposes companies to legal and reputational risks, but can also erode trust with potential hires.
Still not sure what FCRA compliance involves? Check out Certn’s US Background Check Guide for a full breakdown of what US employers need to know.
Streamline Adverse Action Notice Requirements with Certn
Complying with the Fair Credit Reporting Act doesn’t have to be complicated.
Certn helps streamline the adverse action process with automated tools, templated notices, and built-in compliance checkpoints, so you can reduce legal risk without slowing down your hiring.
By handling adverse action notices with care and consistency, you’re doing more than checking a box—you’re reinforcing your brand’s commitment to fairness, transparency, and trust. That matters to candidates. And it matters to your business.
With Certn, you can stay compliant, move fast, and treat candidates like humans, not red flags.
