Question

A company extends an offer to a candidate. As a part of the background check process, a credit check is included. Based on the negative report, the hiring manager wants to rescind the offer. How should HR advise the hiring manager?

Rescind the offer without additional detail or communication to the candidate.
Notify the candidate of the negative credit report and give the candidate sufficient time to respond.
Report the finding to credit bureaus and notify the candidate of this action within seven business days.
Proceed with hiring the candidate and note the matter in the personnel file as reference for possible adverse action.

Answer 1

The correct and legally compliant course of action would be option number 2. HR should inform the candidate about the negative credit report and allow the candidate time to respond, respecting their rights under the Fair Credit Reporting Act.

Step-by-step explanation:

During the hiring process, after a company extends an offer to a candidate, the ensuing background check may include a credit check. If this check reveals a negative report, there are legal and ethical considerations to handling the situation. HR should advise the hiring manager to notify the candidate of the negative credit report and provide sufficient time for a response.

This approach respects the candidate's right to be informed and to address any potential errors on the report. It also aligns with practices under the Fair Credit Reporting Act (FCRA), which requires employers to provide a pre-adverse action notice to the applicant, including a copy of the credit report and a summary of the applicant's rights under the FCRA before making a final decision.

If, after giving the candidate the opportunity to respond or correct any errors, the company decides to rescind the offer based on the credit information received, they must send a final adverse action notice. This notice should explain the decision, offer the name, address, and phone number of the credit reporting agency that supplied the report, inform the candidate of their right to dispute the accuracy or completeness of any information provided by the credit reporting agency, and notify them of their right to receive an additional free credit report from the agency within 60 days.

It is not advisable for HR to suggest either rescinding the offer without communication to the candidate or reporting the finding to credit bureaus. Likewise, the option of proceeding with hiring the candidate and merely noting the matter in the personnel file does not address the potential issue and may create legal risks. Therefore, the correct and legally compliant course of action would be option number two: Notify the candidate of the negative credit report and give the candidate sufficient time to respond.