Resource Center

Form U4 Authorization

Question: Is the authorization in the Form U4 sufficient to authorize a firm to run an outside background check prior to registration? 

Response & Analysis:

No, the authorization in the Form U4 is not consistent with the Fair Credit Reporting Act (FCRA)’s requirement that a disclosure/ authorization be in a stand-alone document without any extraneous information.

The FCRA applies to any company who uses a third-party background screening firm (formally known as a “consumer reporting agency”), and requires that the company provide the applicant subject to screening with a “clear and conspicuous disclosure...in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes.”

The FCRA also requires the company to obtain the consumer’s written authorization to conduct a background check. The Federal Trade Commission (or FTC) has made clear— as have the courts—that Section 604(b)(2) of the FCRA does allow the authorization to be part of this stand-alone document, but no other information can be included. The Form U4’s authorization includes language allowing a firm to file documents electronically, information on service of process, a release of liability, as well as other extraneous information that is not consistent with the FCRA’s “stand-alone” requirement. Thus, the authorization in the Form U4 is not sufficient for a consumer to authorize a background check to be procured from a third party.

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