October 1st 2025: The Spooky Side of the Background Screening Industry

One of the most crucial areas of compliance within the background check industry is Adverse Action. Not only is adverse action extremely regulated & litigated, but it has also been around since the very beginning of the background check industry. The history of adverse action notices in the U.S. is rooted in one of the landmark pieces of consumer protection legislation: the Fair Credit Reporting Act (FCRA) of 1970. This law helped establish a consumer's right to be informed when they are denied credit, employment, or insurance based on information found in a report from a third-party agency. 

What is it?

FCRA Definition Adverse Action - §603(k)(1)(B)(ii) … denial of employment or any other

decision … that adversely affects any current or prospective

Employee…

FCRA Definition Pre-Adverse Action - §604(b)(3)(A) … before taking any adverse action

based in whole or in part on the report, the person intending

to take such adverse action shall provide to the consumer …

(i) a copy of the report; and

(ii) a description in writing of the rights of the consumer …

FCRA Definition Adverse Action Notice Requirement - §615(a) … If any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall (1) provide oral, written, or electronic notice of the adverse action to the consumer; 

Adverse Action Scope - employment denial, promotion,

retention, or other action with adverse impact for all of the following parties:

Employment, Direct employees, and Independent contractors and volunteers

Wait?!?!

Pre-Adverse Action – FTC (Federal Trade Commision) Guidance:

One of the enforcement and educational government bodies in regards to the FCRA law is the FTC (Federal Trade Commission.) The FTC sets forth advisory opinions which are guidance document from the Federal Trade Commission (FTC) or its staff that provides their legal interpretation of how a specific, proposed business conduct or business arrangement would be viewed under FTC rules and laws. The FTC has given two separate advisory opinions pertaining to the waiting period of Adverse Action.

“… the clear purpose of the [adverse action] provision

[is] to allow consumers to discuss reports with employers

or otherwise respond before adverse action is taken.”

- FTC Opinion Letter; Advisory Opinion to Hawkey (12-18-97)

“… the five day period that you proposed appears

reasonable.”

- FTC Opinion Letter; Advisory Opinion to Weisberg (06-27-97)

Pre-Adverse Action Additional Requirements May Include:

Length of waiting period, Identification of specific items

of concern in background

Report, Special notices, or Special forms requiring

employer completion

Pre-Adverse Components

• Consumer Report & Summary of Rights (FCRA Required)

Common Practice: Pre-Adverse Written Notice with Certain Content (Not Required by FCRA)

• An adverse decision is possible based in whole or in part on a background report

• No final decision made

• Candidate’s right to dispute and the time frame to dispute

• CRA contact information

• CRA has no part in the decision

• “Individualized Assessment”

Adverse Action Notice Requirements

• Notice Provided After Waiting Period Elapsed

• Name, address, and toll-free number* of CRA preparing consumer report

• Statement CRA did not make an adverse action decision and cannot provide reasons action was taken

• Consumer’s right to obtain free copy of consumer report from CRA within 60 days

• Consumer’s right to dispute with CRA accuracy or completeness of consumer report content

• Some ban the box laws have added requirements

ProScreening AA Overview

• ProScreening through our Service Agreement advises the client that they have specific, legal requirements regarding taking adverse action based on consumer reports. The User Agreement also advises client that they should consult with their legal counsel prior to taking adverse action based on a consumer report.

• Sample Documentation can be provided

• Clients place order for letter & notices through the system - Help Desk Link w/ call to action

• ProScreening platform provider set up with all Pre & Adverse notices. Triggers set by jurisdictional settings

State, County, and City Adverse Action Requirements

• Below is a list of jurisdictions that require specialized pre-adverse and adverse action notices in addition to the Federal FCRA requirement:

• Please reach out to Account Manager for more information

• Arkansas, California, California - Los Angeles, Delaware, Florida - Gainesville, Georgia, Illinois, Illinois - Chicago, Maryland - Prince Georges & Montgomery Counties, Maryland, Massachusetts, New Jersey, New York, New York - New York City, North Carolina, North Dakota, Oklahoma, Oregon - Portland, Pennsylvania - Philadelphia, Rhode Island, Tennessee, Texas - Austin, Virginia, Washington - Seattle, Washington, West Virginia

• States, Counties, and Cities are always proposing new laws and following suit of other jurisdictions. The list is reflective of the requirements as of now in time. Additional pieces will always be in the pipeline to becoming requirements.

DISCLAIMER

The information and opinions expressed are for educational purposes only and are based on current practice, industry-related knowledge and business expertise. The information provided shall not be construed as legal advice, express or implied.