The Federal Trade Commission (FTC) is the nation’s consumer protection agency, and one of its jobs is enforcing parts of the Fair Credit Reporting Act (FCRA). While the FCRA is often thought of in terms of credit reporting, it also governs how employers use background checks when making hiring and employment decisions.
If your business uses background checks from third-party reporting agencies, the FTC has a direct say in how you do it.
What the FTC does under the FCRA
The FTC’s role is to make sure employers, background check companies (called “consumer reporting agencies”), and others follow the rules when using consumer reports. For employers, this means:
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Ensuring job applicants are given proper disclosure and give written consent before a background check
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Requiring employers to give applicants a copy of the report and a Summary of Rights if they might take adverse action based on it
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Holding employers accountable for using consumer reports only for legitimate employment purposes
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Enforcing penalties against businesses that misuse or fail to safeguard consumer information
The FTC also issues guidance and compliance resources to help employers understand their responsibilities.
Why this matters for employers
When you run a background check on a job applicant or employee, you’re handling sensitive personal data. Missteps—like failing to get written consent or rejecting an applicant without giving them a chance to review their report—can land your business in hot water with the FTC.
Common mistakes employers make
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Using background check services without a signed, standalone disclosure form
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Bundling the disclosure with other hiring documents (FCRA requires it to be separate)
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Failing to give applicants the chance to dispute inaccurate reports before rejecting them
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Running checks inconsistently, which can also create discrimination risks
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Not safeguarding sensitive information obtained from reports
Penalties for noncompliance
FTC enforcement actions can result in:
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Civil fines and penalties
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Lawsuits from affected applicants or employees
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Class actions for widespread violations
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Reputational damage for unfair or unlawful hiring practices
How to stay compliant
- Always provide a clear, standalone FCRA disclosure and get written consent.
- Follow the required pre-adverse action and adverse action steps.
- Apply background checks consistently across similar roles.
- Work with reputable consumer reporting agencies.
- Train HR and hiring managers on FCRA requirements and FTC enforcement rules.
How Kubera HR Solutions can help
At Kubera HR Solutions, we help employers develop compliant background check procedures, create the right forms, and train hiring staff on FCRA rules enforced by the FTC. With the right systems in place, you can make smarter hiring decisions without risking costly enforcement actions.