Background Checks: A $600K FCRA Compliance Mistake

Background checks are essential to hiring – but even small compliance missteps can lead to significant legal risk and costly settlements.

Barnes & Noble, for example, paid $600,000 after a single footnote in their disclosure form sparked litigation. For HR leaders, this case remains a clear reminder to scrutinize every detail of your background screening process to stay compliant with the Fair Credit Reporting Act (FCRA).

Why One Footnote Can Trigger Major Risk

The Barnes & Noble case hinged on the Fair Credit Reporting Act’s strict requirement for a “clear, conspicuous, and standalone” disclosure before obtaining a consumer report. This means the background check disclosure can’t be muddled with extra language, disclaimers or legalese unrelated to the screening itself.

In this instance, a simple footnote stating the disclosure was “not legal advice” opened the door to a class action lawsuit alleging willful violation of the FCRA. 

What Happened in This Case

Job applicant Vicki Hebert filed a class action lawsuit, claiming this extra language violated the FCRA’s requirement for a standalone disclosure.

Barnes & Noble argued the inclusion was an innocent drafting error and that it had relied on legal counsel. A trial court initially agreed, dismissing the case.

However, on appeal, the court reversed, finding enough evidence to suggest reckless disregard of the law. The disclosure form had been in use for nearly two years, and at least one employee knew about the added language. This raised questions about willfulness and whether the violation was intentional or reckless.

Ultimately, Barnes & Noble agreed to pay $600,000 to settle the class action.

The takeaway for HR: Even minor deviations in your background check disclosures, intentional or not, can expose your organization to litigation risk and significant financial penalties.

What This Means for HR Leaders

The Barnes & Noble case highlights a growing trend of FCRA class action lawsuits targeting seemingly minor technical violations in background check disclosures. These cases are not just theoretical risks; they carry substantial financial consequences, including statutory damages of up to $1,000 per violation, punitive damages and attorneys’ fees.

For HR leaders, this means compliance cannot be treated as a checklist item or delegated without oversight. Even if you rely on screening vendors or legal templates, your organization remains ultimately responsible for ensuring every disclosure is accurate and fully compliant.

Modernize to Minimize Risk

Manual processes and outdated forms increase the chance of noncompliance slipping through. HR teams juggling multiple systems or templates are more likely to overlook details that carry real legal consequences under the FCRA.

Modern background check tools help reduce risk by standardizing disclosures, automating required notices and flagging issues before they become liabilities. HR technology isn’t a substitute for due diligence, but it makes consistent compliance easier to sustain as your hiring volume grows.

Legal Insight: Hiring Decisions and Background Checks

Hiring decisions based on background check results carry additional compliance responsibilities. 

As employment attorney Mark Jeffries previously told HRMorning, “Basing a hiring decision on background check results is legal. But if you decide not to hire an otherwise qualified applicant, you must follow clear procedures – including providing the applicant with a copy of the report and summary of their rights under the Fair Credit Reporting Act.”

Jeffries added that having a written policy outlining disqualifying factors helps manage risk, for example, defining which convictions are considered disqualifying and ensuring decisions are job-related and consistent with business necessity.

This approach reduces exposure to discrimination claims and ensures compliance with both EEOC guidance and the FCRA, he said.

What HR Leaders Should Do Now

• Review all background check disclosure and authorization forms. Ensure the disclosure is clear, unambiguous and contains only the required language. No footnotes, disclaimers or extra instructions.
• Confirm your process meets FCRA and state-specific standards. States like California often take a stricter view. Make sure your forms and processes are aligned with both federal and state laws.
• Audit your vendor’s forms and workflows. If you rely on a third-party background screening provider, ask for a current copy of the forms they use and have legal counsel review them.
• Train recruiters and HR staff. Make sure your team understands what’s required under the FCRA and knows the importance of using only approved forms during the hiring process.
• Document your compliance efforts. If you do face a claim, being able to show good faith efforts and consistent practices can help reduce liability.

Closing the Gap on Background Check Compliance

FCRA compliance is rarely about major missteps; it’s often the small ones that cost the most. The line between compliant and exposed is thinner than many HR teams realize. Don’t wait for a claim to expose gaps in your background check process.

If you’re ready to tighten compliance and improve your screening outcomes, our upcoming free webinar, Streamlining Background Checks for Hiring Success, will show you practical ways to boost efficiency, protect candidate experience and stay ahead of compliance pitfalls. Reserve your spot today.