2026 Compliance Trends: FCRA and Identity Fraud Mitigation Strategies for Background Screening

New Year, New Hiring Strategies

It’s officially 2026, and employers are already looking for new ways to optimize their hiring processes. Meanwhile, they’re also hard at work ensuring their background screening efforts are robust enough to mitigate digital identity fraud while also staying in full compliance with all applicable rules and regulations.

In this blog, we’ll help you kick off the new year with confidence, highlighting some of the most prominent trends in background screening today. Let’s examine the evolution of key regulatory agencies, emerging AI legislation, and best practices around FCRA compliance and identity fraud mitigation in the hiring process.

What’s Going on at the Consumer Financial Protection Bureau (CFPB)?

The Trump administration’s recent overhaul of the CFPB has resulted in a considerable decline in regulatory activity, with annual enforcement actions falling to a historic low in 2025.

However, one action the agency took last year was to withdraw virtually all advisory opinions and interpretive guidance compiled over the past decade regarding background screening rules. This action has left employers seeking guidance on their compliance strategies to rely on formalized opinions from the FTC and legal precedent regarding the FCRA.

Additionally, the CFPB also issued a new interpretive rule last October clarifying the withdrawal of an earlier one introduced in 2022 that had narrowed the application of FCRA preemption. The new rule states that the 2022 interpretation was flawed, and that the FCRA should generally be considered to preempt — or take precedent over — state laws when both are addressing similar matters.

The shift in regulatory interpretation currently happening at the CFPB, while unconventional, shouldn’t change much for employers and their background screening processes. However, it’s crucial to understand that the agency’s waning appetite for enforcement doesn’t mean that companies should deprioritize compliance. Instead of relying on regulatory guidance, companies are relying more directly on FCRA language and still need to follow the statutory requirements.

On the contrary, despite these developments, FCRA litigation against employers has actually been increasing, with total cases having risen by more than 36% (YTD) at the end of 2025. This fact just underscores the need to always ensure that actions taken regarding background screening in the US remain in full compliance with FCRA requirements and all applicable state and local laws.

Evolving Legislation Around AI in the Hiring Process

While specific requirements vary by state, most existing state laws addressing AI contain broad language stating that it’s not to be used solely to inform or assist in hiring decisions. Further, many include requirements for employers to audit all AI tools (including those used by third-party vendors) to better understand bias prevention protocols, include human oversight policies, and consider how specific use cases are treated by legal guidance in your jurisdiction.

Adoption of artificial intelligence (AI) is increasing rapidly across industries, but it’s also raising concern among lawmakers about how the technology might be used within the hiring and background screening process. As a result, many states across the US have introduced, and in some cases, successfully passed, legislation to impose rules and restrictions around AI-assisted hiring tech, including California, Colorado, and Illinois.

In December of 2025, President Trump signed Executive Order 14365, demonstrating the administration’s shift towards deregulation and away from state laws that create a patchwork of rules that may, according to the Order, be onerous and hinder innovation. While this Order does not cancel or invalidate existing or new state laws, it does call for a new DOJ task force to focus on pursuing litigation to challenge state laws that conflict with federal policies, and tasks the FTC and other agencies to create a new national standard through adoption of new laws and legal framework.

First Advantage remains transparent in stating that the AI-powered automation tools we leverage in our screening solutions are A) always used with a human in the loop, and B) fully compliant in that neither the technology, nor First Advantage as a company and screening partner, are ever making hiring decisions on an employer’s behalf.

Confused about your compliance obligations surrounding the FCRA and emerging AI regulations?

Due diligence here is important, particularly as these laws continue to emerge. While not authorized to provide legal advice, First Advantage offers our customers access to a variety of sample compliance forms and other relevant resources, compiled by legal professionals and updated each year for accuracy. Contact us today to learn more.

Digital Scams and Identity Fraud Have Grown Increasingly Sophisticated — and Concerning

Scammers are now using AI tools to infiltrate and ultimately exploit vulnerable organizations from the inside. This issue has been on the radar of hiring managers and HR teams for quite some time, but instances of identity fraud scams and security breaches against employers have become increasingly sophisticated, coordinated, and concerning.

For example, in mid-2025, hundreds of US companies, including large, Fortune 500-level organizations, were successfully breached by nefarious IT operatives working on behalf of the North Korean government. These state actors stole funds, sensitive documents, and trade secrets. Posing as remote workers, typically with stated backgrounds in IT and software engineering, these operatives gained access by leveraging stolen identities and manipulating IP addresses to conceal their location.

Of course, it’s critical to note that this incident is just one of virtually countless compounding examples. In fact, a survey of US cybersecurity, IT, and fraud leaders published in 2025 revealed that more than 40% of companies have experienced hiring and/or onboarding a candidate using a fraudulent identity, indicating the rapidly growing importance of robust background screening and identity verification processes.

Best Practices for Identity Fraud Mitigation and Screening Compliance in 2026

Given the trends outlined here, it’s safe to say that addressing matters related to identity fraud mitigation and screening compliance will be top of mind for hiring managers and HR leaders in 2026. Here are just a few tips and best practices to help set you on the right track:

• Strengthen hiring security with advanced identity verification tools. In response to the sharp rise in employment identity fraud, we’re seeing many of our customers looking to integrate First Advantage’s advanced, AI- and data-powered identity solutions into their hiring tech stack. This is one of the easiest and most effective ways to strengthen organizational security, and we often frame it like this: Just as the front desk at an office building checks to ensure someone’s ID matches the person on record before allowing access to the elevator, no potential new hire should be set on a course to being background screened for the company before their identity has been accurately verified.
• Connect and consult with industry peers. While everyone wants to be the best in their field, there’s also enormous value in connecting and consulting with your industry peers and competitors to understand how they’re approaching similar challenges — especially as it relates to complex issues like hiring and background screening compliance. In addition to working with your First Advantage customer success team to learn more about prominent trends in your field, we encourage all customers each year to attend our annual Collaborate conference, in which employers have an opportunity to come together for networking and benchmarking opportunities with hundreds of their industry peers and innovation leaders. This year, Collaborate will take place at the Diplomat Beach Resort in Hollywood, Florida from April 28-30, and registration is now open.
• Your screening partner provides guidance and educational resources. Finally, at First Advantage we refer to ourselves as your screening partner for a reason: We provide access to a wide and constantly expanding range of useful resources, including samples of standardized documents, compliance form templates, and industry benchmarking materials. We also maintain a team of specialized customer success representatives dedicated to providing expert advice and consultative guidance on your screening strategies. Even if you’re looking for a simple clarification on how our technology is used and what that means for your compliance posture, our reps are always available to answer your questions and discuss your needs.

Looking to bolster your hiring processes with advanced background screening, onboarding, and identity verification solutions? First Advantage is a leader in fast, compliance-focused, candidate-friendly, and AI-powered screening solutions supported by 1 billion+ records in proprietary databases¹ and global expertise.

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