Adverse Action – The Nitty Gritty Details

What is Adverse Action and how does it apply to you as an employer?
Organizations turn to pre-employment background checks to protect them from several levels of risk and possible litigation. If you are an employer denying employment to an applicant BASED ON the results of a background check that you obtained (with the applicant’s signed authorization of course) from a Consumer Reporting Agency (I.e -MBI Worldwide) then you must follow the rules of the FCRA (Fair Credit Reporting Act).
The FCRA states that “any decision that is adverse to the interests of the current and or prospective employee is an Adverse Action” This is where the Adverse Action process comes in!

Adverse Action is 3 step process:

• Step 1: PRE-ADVERSE ACTION.
You have received the report back on your applicant and the information returned does not follow your hiring criteria /policy standards. Now you will need to inform the applicant of the findings. The Pre-Adverse Action notice is a letter stating adverse information was found and you may make an adverse decision based on that report – such as not hiring them. With the letter you will also supply them with a copy of their Consumer Report and Summary of Rights. The Consumer report is the report that was provided to you by the CRA. Please see examples of the Pre-adverse Action letter, Consumer Report and Summary of Rights below. You may send the letter via mail or email.
(ALL PII INFORMATION MUST BE REDACTED FROM THE CONSUMER REPORT FOR CONFIDENTIALITY PURPOSES. PII IS “PERSONAL IDENTIFYING INFORMATION” – ALL SOCIAL SECURITY NUMBERS, DATE OF BIRTH, DRIVER’S LICENSE NUMBERS ETC)

• Step 2: THE WAITING GAME.
Now we wait. Once the Pre-adverse letter, Consumer Report and Summary of Rights has been sent, you must allow the applicant time to not only receive the information but also allowing them time to dispute anything they may see as inaccurate or incorrect on their report. There is no defined amount f time that you must wait but it is recommended to wait 5-7 business days. During that time, you as the employer will need to hold the position open that the applicant had applied for.
– What happens if the applicant disputes the information and who do they contact?
If an applicant decides to dispute the information on their report they may contact you the employer initially, but you will need to direct them to the person in charge of Compliance within the CRA’S organization. Once the dispute process begins, you as the employer do not need to communicate with the applicant. The Compliance officer will gather all of the information from the applicant they feel is inaccurate and begin a re-investigation. The Compliance officer will immediately inform the employer of the dispute and of the re-investigation. During the re-investigation process, the compliance officer will go directly to the source from which the disputed information was obtained (example – state or county level of court, department of motor vehicles etc). The information will be verified as either correct or incorrect and the report will be corrected immediately if the information was inaccurate or stay the same if the information was accurate. The compliance officer will keep a detailed log of every person they spoke with as well as any changes made to the report. The next step in this process is informing the applicant and the employer of the findings. If the report has been changed in ANY way, a new copy of the report will be provided to the employer and also be mailed to the applicant. A re-investigation letter is also supplied to the applicant.
If no dispute happens within the 5-7 business days – then our final step will now be processed…Adverse Action Notice

• Step 3: ADVERSE ACTION.
The Adverse Action Process is basically the same process as the Pre-Adverse, you will send out the Adverse Action Notice (after the 5-7 business days and no dispute) as well as another copy of the redacted background report and Summary of Rights.

How Can MBI Help?
MBI Worldwide offers compliance services to all of our clients. You may choose to handle the Adverse Action process on your own, or have us handle the Adverse Action process for you! The latter would be relieving you of the headache of keeping track of when letters were sent out, if you removed all of the correct information and making sure you are waiting the appropriate amount of time in between processes. If you are interested in MBI handling all of your Adverse Action processes, contact MBI Worldwide’s Compliance Department at  info@mbiworldwide.com or  618-942-8808.

The Take Away
At the end of the day, everyone who is in the position of hiring and firing MUST be processing Adverse Action, and handling the process correctly and legally.  Sending adverse action letters and keeping the applicant in the loop at all times may seem like a pain, but trust me, it will save your company from lots of potential pain in the future by adhering to this process.

Bethany Thompson
Compliance Manager / MBI Worldwide

DISCLAIMER – MIDWEST BACKGROUNDS, INC. DBA MBI WORLDWIDE CANNOT AND DOES NOT PROVIDE LEGAL ADVICE OR COUNSEL. Although MBI strives to support you with alerts and resources regarding critical compliance matters, please understand that MBI Worldwide CANNOT provide legal advice regarding forms, contracts or compliance topics. Nothing in this statement or any other communications with MBI Worldwide should be construed as legal advice. If you have legal questions, please consult with legal counsel, who can best advise you on the legalities of obtaining and using consumer reports.