Over the past several years, employers and consumer reporting agencies (CRAs) have faced a notable increase in litigation related to background checks, particularly under the Fair Credit Reporting Act (FCRA) and Title VII of the Civil Rights Act as enforced by the Equal Employment Opportunity Commission (EEOC). What once were occasional compliance cases have grown into a broader pattern of legal exposure that underscores how risky it is to treat screening as a checkbox or cost-cutting exercise.
This trend isn’t theoretical. 2025 saw reports indicating that FCRA lawsuits increased more than 37% and consumer complaints nearly doubled. These are not abstract numbers… they represent real legal and reputational costs.
Below are some of the most important recent examples. Each underscores the legal and strategic risk of poorly executed or uninformed screening programs.
Notable FCRA & Background Check-Related Lawsuits and Actions
- Background Checks Can Trigger FCRA Lawsuits, Even When Accurate
A current legal advisory notes that applicants who are denied jobs, have offers revoked, or are terminated after a background check may have grounds to pursue FCRA claims if the statutory procedures weren’t followed, including proper disclosure, authorization, report sharing, and adverse-action notices.1
Why it matters: Even if screening information is accurate, failing to follow FCRA’s procedural requirements can open the door to litigation.
- Employers Face EEOC Suits Over Disparate Impact from Criminal History Policies
In 2013, the EEOC filed lawsuits against employers like BMW Manufacturing and Dollar General, alleging their criminal background check policies had a disparate impact against minority applicants, which can violate Title VII if not justified by business necessity.
Another similar case was brought against Sheetz, Inc., where the EEOC claimed its screening practices disproportionately excluded certain racial groups. These practices are now under legal scrutiny, illustrating how background policies can intersect with discrimination law.2
- Significant Class Action Settlements Continue Around Background Check Compliance
Recent reports show multiple seven-figure background check–related settlements, including:
- A $2.425M settlement involving PeopleFacts over alleged FCRA background check violations,
- A $2.5M TransUnion settlement over allegedly unauthorized credit reports,
- A $5M class action settlement against J.B. Hunt for alleged background check violations all in 2025 alone.3
These examples aren’t isolated; they reflect an ongoing pattern of litigation and enforcement around background screening and there is no end in sight.
- Technical Compliance Gaps Drive Most Lawsuits
Legal experts note that the largest percentage of FCRA-related lawsuits stem from three common compliance mistakes:
- Non-compliant disclosure forms
- Missing or delayed pre-adverse action notices
- Inadequate authorization forms
These errors can translate into statutory damages and costly settlements even when the underlying information in the report is factual.
What These Cases Reveal
Litigation Is About Process, Not Just Information
One consistent thread is that plaintiffs rarely challenge what the background report contained, instead, they challenge how it was used or disclosed. The FCRA and EEOC regulations are highly technical, and seemingly minor deviations in process, like improper disclosures, ambiguous language, or failing to allow time for candidate response, can trigger lawful claims.
Disparate Impact Laws Are Evolving and Still Matter
EEOC enforcement actions make clear that employers’ screening policies can unintentionally run afoul of anti-discrimination law if they disproportionately screen out protected groups without a clear business necessity justification. Even in areas where enforcement priorities are shifting, such claims remain relevant and can emerge as class actions.
The Role of AI and Automated Screening Tools Is Emerging as Risky Too
New litigation is testing how automated hiring tools, including AI-driven background and screening systems, fit within FCRA compliance requirements, particularly around notice and consent, suggesting that tech complexity can increase legal exposure.4
What’s Driving the Increase in Lawsuits
- Greater public awareness of screening rights, driving more legal action under FCRA.
- Heightened regulatory focus on bias in criminal background check policies, particularly when they create disparate impact.
- Rising use of automated tools and AI, where notice and consent processes are not fully aligned with compliance expectations.
The result: organizations that rely on outdated contract language, generic vendor templates, or minimal oversight are now seeing real legal exposure, costly settlements, and potential reputational damage.
Why this Trend Happens: Treating CRAs as Vendors, Not Partners
Too often, HR teams and employers treat background screening providers as “transactional vendors”, bodies that simply run reports cheaply and quickly. This mindset overlooks the critical role screening partners play:
- Vendors focus on pushing volume
Many low-cost providers emphasize speed and price, not compliance strategy or legal nuance.
- HR Receives Reports Without Compliance Coaching
If HR teams aren’t empowered with compliance expertise, or if screening partners don’t help interpret legal duties, procedural missteps become almost inevitable.
- Policies Are Not Updated to Reflect Current Law
Laws like FCRA, Title VII, and even emerging AI accountability requirements evolve frequently. Without proactive guidance, policies quickly become stale.
The litigation trend shows a simple truth: Background screening is not a commodity. It’s a risk management function. And risk management requires partnership…not checkbox transactions.
What a True Screening Partner Does
An effective organization with a background screening partner should offer templated:
- Compliance-aligned forms and workflows that reflect current FCRA and discrimination law specifics.
- Guidance on adverse action and dispute handling to close legal gaps.
- Continual education on changes in EEOC guidance and CFPB trends.
- Operational alignment with HR’s policies and risk tolerance.
When screened correctly, not just cheaply, background checks protect employers, respect candidates’ rights, and mitigate long-term legal exposure.
Conclusion
The uptick in FCRA and discrimination-related lawsuits tied to background checks reflects a harsh legal reality: compliance complexity, evolving societal expectations, and technical procedural mandates have made screening a high-risk activity. Organizations that approach this function casually or as a transactional necessity are increasingly vulnerable.
Strong HR teams deserve screening partners who are strategic, up-to-date, and compliance-focused. As litigation trends show, the cost of treating background checks as “cheap commodity services” is no longer theoretical, it’s financial, legal, and reputational.