Government Oversight and Enforcement of Accuracy in Background Check Industry to Increase in 2016

ESR Top Ten Background Check Trends for 2016

Written By ESR News Blog Editor Thomas Ahearn

There will be increased governmental oversight and enforcement of the background check industry, with a particular focus on issues involving the accuracy of information contained in background check reports, from federal agencies such as the Consumer Financial Protection Bureau (CFPB) in 2016. This is the number 1 trend selected by Employment Screening Resources® (ESR) Founder and CEO Attorney Lester Rosen for the 9th annual ESR Top Ten Background Check Trends for 2016.

“Issues relating to background checks have become something clearly in the public eye, either because people think they are not extensive enough or conversely that they go overboard and are unfair to ex-offenders,” says Rosen, author of ‘The Safe Hiring Manual’ and a frequent speaker on background check issues. “However, what everyone agrees about is the need for accuracy and the government agencies are now squarely focused on accuracy issues.”

Rosen says the focus on accuracy primarily involves criminal records. Regulators, legislators, and advocacy groups are concerned about both “false positives” and “false negatives.” A false positive is misreporting a criminal record based on a database search or a name match where there are not sufficient indicators that the record is associated with the subject of the background check report, or where a record has been expunged or set aside and should not have been reported, says Rosen.

On the other hand, Rosen says false negative is a criminal record that is missed that should have been reported. Under a federal law called the Fair Credit Reporting Act (FCRA), a background check firm has a duty utilize reasonable procedures to obtain maximum possible accuracy. If a background check company does not attempt to ensure “maximum possible accuracy,” they could find themselves in non-compliance with the FCRA and other governmental institutions, Rosen says.

One only has to look at the news to see signs of more government oversight with regard to accuracy in the background check industry. In October 2015, ESR News reported that the Consumer Financial Protection Bureau (CFPB) ordered two of the nation’s largest employment background check firms to pay a total of $13 million for allegedly failing to take steps to ensure the accuracy of the information they reported about job applicants contained in background check reports given to employers.

According to a news release from the CFPB, the two background check companies had to provide $10.5 million in relief to harmed consumers and pay a $2.5 million civil penalty. CFPB Director Richard Cordray stated that the two firms “failed to take basic steps to provide accurate background screening reports to employers about job applicants.” By entering into a consent decree, the two background check firms consented to the order without admitting or denying any findings of facts or conclusion of law.

The CFPB – a federal agency responsible for consumer protection in the financial sector – claims that the background check firms violated the Fair Credit Reporting Act (FCRA) by failing to employ reasonable procedures to assure the maximum possible accuracy of information contained in reports provided to potential employers of consumers. The CFPB consent order is available at: http://files.consumerfinance.gov/f/201510_cfpb_consent-order_general-information-service-inc.pdf.

The Dodd-Frank Wall Street Reform and Consumer Protection Act signed into federal law by President Barack Obama in 2010 authorized the creation of the CFPB which has the authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices or violating federal consumer financial laws. The CFPB claimed “serious inaccuracies” reported by the background screening firms potentially affected the employment eligibility of consumers and caused them harm.

Another example of government oversight of the background check industry occurred in August 2015 when ESR News reported that the U.S. Department of Justice (DOJ) and a background check contractor agreed to settle a case for $30 million that claimed the background check contractor allegedly failed to perform required quality control reviews on background check investigations for the U.S. Office of Personnel Management (OPM) in violation of the False Claims Act (FCA).

According to a DOJ press release, the background check contractor and its parent company agreed to forgo their right to collect payments owed to them by OPM in exchange for a release of liability under the FCA. The government claimed the background check contractor allegedly circumvented required quality reviews of completed investigations from March 2008 to September 2012 through the practice of “dumping” or “flushing” which involved releasing cases to OPM as complete when they were not.

By relying upon the alleged false representations made by the background check contractor, the government contended that OPM issued payments and contract incentives that would not otherwise have been issued had OPM been aware that the background check investigations had not gone through the required quality review process. The DOJ press release also stated that the “claims resolved by the settlement agreement are allegations only and there has been no determination of liability.”

The U.S. government has scrutinized the accuracy of the background check industry for some time. In June 2014, ESR News reported that the OPM’s Office of the Inspector General (OIG) Office of Audits released a performance audit of the background check process used by the Federal Investigative Services (FIS). The audit determined that OPM “needs to strengthen its controls” over government background check contractors and the background investigation review process.

The audit came in the wake of January 2014 report that the DOJ had accused a private background check contractor of faking at least 665,000 completed background checks while receiving nearly $12 million in bonus payments from 2008 to 2010. Prosecutors claimed that the background check contractor used a computer program to “flush” or “dump” about 40 percent of the background checks conducted during that time and completed them without a quality review required by the government contract.

The focus on accuracy is not limited to private background check firms searching for criminal records. Even the Federal Bureau of Investigation (FBI) database – commonly known as a “rap sheet” – has come under criticism as well. Rosen explains that the National Crime Information Center (NCIC) – the formal name for the automated database of criminal justice records maintained by the FBI – is not nearly as complete most people believe since many criminal records do not make it into the system.

“The NCIC is not nearly as complete as portrayed in the movies. Because of the chain of events that must happen in multiple jurisdictions in order for a crime to appear in NCIC, many records of crime do not make it into the system,” says Rosen about the NCIC. “The information the NCIC does have is predominantly arrest-related. The disposition of most crimes in NCIC must be obtained by searching at the adjudicating jurisdiction. Dispositions are an important issue for employers.”

In March 2015, ESR News reported that the Government Accountability Office (GAO) released a report on the use of criminal background checks titled Criminal History Records: Additional Actions Could Enhance the Completeness of Records Used For Employment-Related Background Checks that assessed efforts to address concerns about incomplete records. The report found that there are still gaps such as incomplete records that can delay criminal record checks and affect applicants seeking employment.

A 2013 report by the National Employment Law Project (NELP) – Wanted: Accurate FBI Background Checks for Employment – highlighted the many sources of inaccuracies in the FBI database when used as a tool to look for convictions. The report from NELP revealed that almost 600,000 of the nearly 17 million employment background checks the FBI processed in 2012 contained inaccurate information, and that an estimated 1.8 million workers were subjected to inaccurate checks each year.

“Although industry statistics may suggest that the error rate is statistically minimal, that is of no comfort to a consumer that loses an employment opportunity due to an erroneous report,” comments Rosen. “Although the FCRA has a built in safety valve with the mandated pre-adverse and post-adverse action procedures in order to catch such errors, it is still in the interest of employers to utilize background check firms that have accuracy and legal compliance as their primary objectives.”

Rosen says that given the nature of how criminal records are created and maintained, a 100 percent accuracy rate across millions of background checks is impossible, but having procedures and processes in place to maximize accuracy and a commitment to accurate information is the critical step. As an example of an industry commitment to accuracy, Rosen mentions the accreditation program set up by the National Association of Professional Background Screeners (NAPBS).

The NAPBS offers a Background Screening Agency Accreditation Program (BSAAP) as a recognized seal of approval for excellence, accountability, high standards, and continued improvement. To be NAPBS accredited, a background check firm must pass an audit related to six critical areas of the BSAAP: Consumer Protection, Legal Compliance, Client Education, Product Standards, Service Standards, and General Business Practices. More information is available at www.napbs.com/accreditation/.

A group of some 200 Consumer Reporting Agencies (CRAs) called Concerned CRAs – CRAs being the technical term for background check firms – have adopted the voluntary standards and pledged not to use database information without first confirming that it is accurate, complete, and up to date before being provided to an employer since information from a commercial criminal databases is subject to errors. More information about Concerned CRAs may be found at www.concernedcras.com.

ESR Ensures the Accuracy and Security of Background Check Data

Employment Screening Resources® (ESR), a global background check firm accredited by the National Association of Professional Background Screeners (NAPBS), follows industry leading standards and best practices to ensure accurate background checks. ESR completed a SOC 2® Audit Report stating that ESR meets high standards for protecting the security, confidentiality, and privacy of background check data. ESR is also a member of ConcernedCRAs. To learn more, call 888.999.4474 or visit www.esrcheck.com.

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