The Federal Trade Commission (FTC) recently announced that it will require two background reporting companies and three related organizations to pay a $5.8 million penalty. This decision settles allegations that they violated the Fair Credit Reporting Act (FCRA). In addition, this penalty addresses claims that the companies marketed their consumer background reports as a tool to screen applicants.

According to Samuel Levine, Director of the Bureau of Consumer Protection, “Companies that compile personal information and sell background reports are on notice: Don’t make false claims about the contents of your reports. And, if you market your reports to be used to screen tenants or employees, you are a consumer reporting agency, and you must follow the requirements of the FCRA.”

The Complaint

The FTC complaint explained that the companies made themselves subject to the FCRA. They accomplished this by purchasing advertising keywords from major search engines to make their services appear for employment or tenant screening services. These purchases included keywords such as “pre-employment screening” and “tenant background check.” The FTC argued how providing these background reports with the expectation to use them for employment or housing qualifies them as consumer reporting agencies under the FCRA.

According to the FTC, these companies committed multiple violations under the FCRA. For example, the companies failed to comply with the FCRA’s Section 607(a): Furnish consumer reports for “permissible purposes” only. The companies also failed to investigate or respond to consumer disputes despite providing buttons marked “Remove” and “Flag as Inaccurate.”

What Happened

Furthermore, the companies advertised their extreme accuracy despite taking no steps to verify the accuracy of third-party information. The FTC also claimed the companies provided push notifications or statements indicating that individuals had criminal or arrest records. However, consumers had to pay a monthly subscription fee to see the full report. In many cases, the reports only contained non-criminal traffic violations.

The proposed settlement is still waiting for approval by a judge. Until approved, the companies must implement a monitoring program to ensure they do not violate the FCRA further. Furthermore, this program will assess whether they operate as a whole or partial consumer reporting agency.

This case serves as a reminder that all employers must comply with the FCRA when acquiring consumer reports. One way to ensure compliance is by working with a trustworthy background screening company. The right provider will provide accurate reports that meet federal, state, and local screening regulations.

JDP offers experienced background screenings to help you stay compliant in your hiring practices. Contact a sales rep today.

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