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What are Pre-Adverse Action and Adverse Action Notices

What are Pre-Adverse Action and Adverse Action Notices?

“Our company has decided against hiring a candidate based on information found in his background check. What are our options, and what are the next steps we must take in order to remain FCRA compliant?”

Pre-Adverse Action and Adverse Action letters are notices mandated by the Fair Credit Reporting Act that inform an applicant they are being denied employment, insurance, or credit based on information reported in a background or credit check.

A Pre-Adverse Action Notice must be given to the applicant before making a final decision about the applicant’s hiring status. Included in the notice should be a “consumer copy” of the background check and a notification of the applicant’s rights under the FCRA. These notices are also provided, by mandate, to the applicant when they agreed to the background screening.

An Adverse Action Notice is given to the applicant after the employer has made its final decision. The employer must provide a “reasonable” amount of time between sending the Pre-Adverse Action Notice and the Adverse Action Notice. This is typically 5 to 10 business days.

What does “Ban the Box” mean?

What does “Ban the Box” mean?

Ban The Box

Ban The Box

Typically, “Ban-the-Box” initiatives prohibit employers’ job applications from having any question asking the applicant of convicted crimes.  On paper applications, this has been a check box — hence the term “Ban-the-Box”.

Q.  Do “Ban-the-Box” laws prohibit using background checks?

A. No. Typically, “Ban-the-Box”  laws do not forbid employers from running pre-employment background checks.  Some of these laws do stipulate when a background check can be used in the hiring process.  If the law in question does touch on the timing, it typically falls into one of two events: either after the first job interview, or after a conditional job offer has been made.

Q. Do all “Ban-the-Box”  laws apply to private and public sector employers?

A. No. A majority of the state level laws apply to public sector employers only.

Q. Which states have “Ban-the-Box”  laws that apply to private employers?

A. Here are the states that currently have laws in place that “Ban the Box” for private employers.

  • California
  • Connecticut
  • Hawaii
  • Illinois
  • Massachusetts
  • Minnesota
  • New Jersey
  • Oregon
  • Rhode Island
  • Vermont 

Q. What municipalities/counties have ban the box laws that impact private employers?

A. Here is a list of the municipalities that currently have private employer initiatives:

  • Austin, TX
  • Baltimore, MD
  • Buffalo, NY
  • Columbia, MO
  • District of Columbia
  • Kansas City, MO
  • Los Angeles, CA
  • Montgomery County, MD
  • New York, NY
  • Philadelphia, PA
  • Portland, OR
  • Prince George County, MD
  • Rochester, NY
  • San Francisco, CA
  • Seattle, WA
  • Spokane, WA
  • Washington, DC
The One Minute Guide to the FCRA.

The One Minute Guide to the FCRA.

Q.  What is the FCRA?

A.  The FCRA, otherwise known as the Fair Credit Reporting Act, is the primary piece of federal legislation that  is used to regulate background screening and credit checks.  The FCRA was originally passed in 1970 and major amendments were made in 1996, 1998 and 2003. You can read the entire text of the act here.

Q.  Who regulates the FCRA?

A. The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB).

Q.  What are the rules laid out by the FCRA?

A.  The FCRA is very complex legislation.  Here are just some of the key points it spells out:

  • What are permissible purposes for running a background check.
  • The roles and responsibilities of:
    • Employers
    • Consumer Reporting Agencies (CRA’s)
    • Data Providers
  • A subject’s (individual consumer) rights and responsibilities.
  • Guidelines for obtaining a subject’s authorization prior to running a background check.
  • Guidelines for notifying a subject that a background check may be requested.
  • When a subject of a background check should be provided a copy of their report.
  • How and when to notify a subject that they are being denied employment due to the results of their background check.

This is just a quick overview of  the FCRA.  We will explore it more in depth in future posts!