Federal Requirements for Employee Credit Checks

Highlighting federal regulations alongside the Illinois Employee Credit Privacy Act, we underscore four vital Fair Credit Reporting Act mandates for employee credit checks. These cover consent, adverse action notices, and response time, which are all essential for compliance in hiring processes.

Referenced Links:

Employee Credit Checks: Illinois Courts Weigh In
Authorization and Disclosure Form
Summary of Rights



A few weeks ago, we discussed the Illinois Employee Credit Privacy Act. And the requirements if you’re going to run a credit check from a state basis, credit check on potential employees or even your current employees. And so this week, we’re going to talk about the federal statutes that surround credit and running credit reports on employees. And so the additional requirements. So last time, we talked about when you could do it, and in the six factors that Illinois law requires that you go through, and then federal statute covers what happens if you actually do the credit reports and what your requirements are.

So there are four major issues that come up in the in the Federal Fair Credit Reporting Act. First is you have to get notification and authorization from the potential employee, the candidate, if you will, you have to give them notification and get their authorization to run the credit check. Okay, so you have to do that in advance of actually doing it. All right, that’s really important. And if you want that, by the way, there’s a notice there’s a sample notice that we’ve included in the links down below.

Second is, if you make a determination that you’re not going to hire them based on their credit report, you have to actually give them a pre adverse action notice. So in advance of not giving them the job right? At that stage, then you have to give them notice that you’re not going to give them a job, right. So in that, in addition to that notice, you also have to give them a summary of their rights. And then we’ll include that summary of their rights notice, down below as well. All right, now, the next thing you have to do is give them appropriate amount, a reasonable amount of time to respond some has to be at least several business days can just give them a couple of hours, don’t just give them a weekend, give them a few business days to respond to your pre adverse action, notice that you just sent him in the previous step. So you have to give them a reasonable amount of time to respond.

And the last is at the end, right. So once you’ve made the decision, once they you’ve given them the appropriate amount of time to respond, then you have to give them a post adverse action. Notice, okay, and so what that means is basically have to tell them that, that you did make a decision to not hire them based on a negative credit report. But also you have to notify them that for 60 days that they do have the option of receiving a free credit report. And so that is a part of that notice, as well. So all four of those things have to be done. If you plan on if you plan on doing the credit check, of course, the first one, which is the notification authorization, the remaining three are is if you make a determination that you’re going to make an adverse decision or choose to not hire them based on their credit report. So you want to make sure that you jump through those hoops. All of these are critically important. This is the federal statute that attaches in addition to the to the Illinois law that we discussed a couple of weeks ago. You have a great week. We’ll catch you next week.

About Author

Marc Abla, CAE

Marc Abla began working at the Illinois Chiropractic Society in 2002 and became the Executive Director in 2008. He brings his extensive financial, administrative and association experience to the ICS. He is a Certified Association Executive and a graduate of the Certified Leadership Series through the Illinois Society of Association Executives. Additionally, he is a member of the Illinois Society of Association Executives, the American Society of Association Executives, Association Forum, Congress of Chiropractic State Associations, and the American Chiropractic Association.

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