The Federal Trade Commission (FTC) has warned marketers of six mobile applications that provide background screening “apps” that they may be in violation of the Fair Credit Reporting Act (FCRA), a federal law enforced by the FTC, and that they must comply with the FCRA if they have reason to believe the background screening reports they provide are being used for employment, housing, credit, or other similar purposes. The FTC press release is available at: http://www.ftc.gov/opa/2012/02/mobileapps.shtm. A sample warning letter from the FTC to the six mobile phone background screening apps marketers, available at http://www.ftc.gov/os/2012/02/120206mobileappsletter.pdf, reads as follows: This letter concerns your company’s mobile application(s) that may be in violation of the Fair Credit Reporting Act (“FCRA”), a federal law enforced by the Federal Trade Commission (“FTC”). Under the FCRA, a company is a consumer reporting agency (“CRA”) if it assembles or evaluates information on consumers for the purpose of furnishing “consumer reports” to third parties. Consumer reports include information that relates to an individual’s character, reputation or personal characteristics and are used or expected to be used for employment, housing, credit, or other similar purposes. For example, when companies provide information to employers regarding current or prospective employees’ criminal histories, they are providing “consumer reports” because the data involves the individuals’ character, general reputation, or personal characteristics. Such companies, therefore, are acting as CRAs in this capacity and must comply with the FCRA. CRAs must comply with several different FCRA provisions, including taking reasonable steps to ensure the maximum possible accuracy of the information provided in consumer reports. A CRA must also provide those who use its consumer reports with information about their obligations under the FCRA. In the case of reports provided for employment purposes, for example, the CRA must provide employers with information regarding their obligation to provide employees or applicants with notice of any adverse action taken on the basis of these reports, and to notify them of their rights to copies of the reports and to a free reinvestigation of information the consumer believes to be in error. A model notice is available in 16 Code of Federal Regulations § 698, Appendix H, which can be found at http://www.ftc.gov/os/2004/11/041119factaapph.pdf. At least one of your company’s mobile applications involves background screening reports that include criminal histories. Employers are likely to use such criminal histories when screening job applicants. If you have reason to believe that your reports are being used for employment or other FCRA purposes, you and your customers who are using the reports for such purposes must comply with the FCRA. This is true even if you have a disclaimer on your website indicating that your reports should not be used for employment or other FCRA purposes. We would evaluate many factors to determine if you had a reason to believe that a product is used for employment or other FCRA purposes, such as advertising placement and customer lists. At this time, we have not made a determination as to whether your company is violating the FCRA. However, we encourage you to review your mobile applications and your policies and procedures for compliance with the FCRA. You may find the full text of the FCRA and more information about the FCRA at http://www.ftc.gov/os/statutes/fcrajump.shtm. The Commission reserves the right to take action against you based on past or future law violations; your practices also may be subject to laws enforced by other federal, state, or local law enforcement agencies. A violation of the FCRA may result in legal action by the FTC, in which it is entitled to seek injunctive relief and/or monetary penalties of up to $3,500 per violation. According to the letters, the FTC has made no determination whether the companies are violating the FCRA, but encourages them to review their apps to be sure they comply with the FCRA, which is designed to protect the privacy of consumer report information and ensure that the information supplied by consumer reporting agencies is accurate. Consumer reports are communications that include information on an individual’s character, reputation, or personal characteristics and are used or expected to be used for purposes such as employment, housing or credit. A 2011 white paper – ‘Background Check Mobile Phone Apps and Instant Background Check Web Sites: Fast and Easy, But Are They Accurate?’ – also noted the same issues about FCRA compliance that the FTC warned of regarding background screening apps that allow users to perform instant background checks on anyone at any time from their mobile phones by searching publicly available records. Co-written by Attorney Lester Rosen, Founder and CEO of Employment Screening Resources (ESR), and Kerstin Bagus, Director of Global Compliance at LexisNexis® Screening Solutions, the white paper examined the accuracy of background screening mobile apps and found that while these apps may be fast, cheap, and easy to use, the information they provide may not be entirely accurate. According to the authors, the instant background screening information “can lead to hasty and dangerous conclusions” in the hands of average users, including:
- Reporting inaccurate information. Since these apps typically return raw data not fully verified or confirmed with the original record source, they can include “false positives” with outdated results such as a conviction history that does not exist. Even worse, they can show “false negatives” with no criminal history when one actually does exist.
- Returning information for the wrong person with the same name. Since these services do not generally require identifiers such as dates of birth, they can return results that match the name entered, but do not necessarily match that exact person—an issue often referred to as “common names.”
- Creating a false sense of security. Safety issues can quickly arise when a “clear” background check result is naively interpreted as a promise that the person being searched has no criminal record.
- Privacy issues for the person being checked. Since the average person is not knowledgeable about the proper usage of public records, there are no privacy controls in place for the individual being searched.
- Reputational injuries. The reputation of the individual being searched may be harmed if the information is not correct.
- Misuse of information for employment or tenant purposes. Employers and landlords who use results from these sites can find themselves in a legal and financial nightmare due to intense legal regulation surrounding the use of information for employment purposes from the FCRA as well as numerous state laws. While some of these services say that the data should not be used for employment or tenant screening or any FCRA purpose, these warnings are often buried in fine print. There are even sites that do not even mention the FCRA.