In a developing story that shows why Consumer Reporting Agencies (CRAs) should follow the Fair Credit Reporting Act (FCRA) when providing background checks, the Federal Trade Commission (FTC) recently warned marketers of six background check mobile applications (“apps”) that they may be violating the FCRA, a federal law enforced by the FTC that regulates CRAs. The FTC sent letters to three background check app marketers warning that they must comply with the FCRA if the background check reports they provide are being used for employment, housing, and credit purposes, according to an updated FTC press release at: http://www.ftc.gov/opa/2012/02/mobileapps.shtm. In the press release, the FTC named the three background check mobile app marketers that received the warning letters:

  • Everify, Inc., marketer of the Police Records app;
  • InfoPay, Inc., marketer of the Criminal Pages app, and;
  • Intelligator, Inc., marketer of Background Checks, Criminal Records Search, Investigate and Locate Anyone, and People Search and Investigator apps.
The FTC – the federal agency that works to protect America’s consumers – also provided links to copies of the warning letters in the press release: According to the letters, the FTC has made no determination whether the companies are violating the FCRA, but encourages them to review their background check apps and their policies and procedures. A portion of the letters read: “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 background reports are being used for employment or other FCRA purposes, you and your customers who are using your reports for such purposes must comply with the FCRA.”  The press release ‘FTC Warns Marketers That Mobile Apps May Violate Fair Credit Reporting Act’ is available at: http://www.ftc.gov/opa/2012/02/mobileapps.shtm. The FCRA is designed to protect the privacy of consumer report information and ensure that the information supplied by CRAs 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. Under the FCRA, operations that assemble or evaluate such information to provide to third parties qualify as CRAs. Background check mobile apps marketers may qualify as CRAs under the Act since they assemble or evaluate similar information to provide to third parties. As CRAs, they must:
  • Take reasonable steps to ensure the user of each report has a “permissible purpose” to use the report;
  • Take reasonable steps to ensure the maximum possible accuracy of the information conveyed in its reports; and
  • Provide users of its reports with information about their obligations under the FCRA, such as their obligation to provide notice to employees and applicants of any adverse action taken on the basis of a consumer report.
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 background screening mobile apps marketers about in the letters. Co-written by Attorney Lester Rosen, founder and CEO of Employment Screening Resources (ESR), a San Francisco-area background check firm accredited by the National Association of Professional Background Screeners (NAPBS), the white paper examined the accuracy of background check mobile apps. While background check mobile apps may be fast, cheap, and easy to use, the information they provide may not be entirely accurate and “can lead to hasty and dangerous conclusions” such as:
  • Reporting inaccurate information.
  • Returning information for the wrong person with the same name.
  • Creating a false sense of security.
  • Privacy issues for the person being checked.
  • Reputational injuries.
  • Misuse of information for employment or tenant purposes.
Rosen also says employers and landlords who use results from background check apps 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. “Background checks based upon databases are subject to both false negatives and false positives and they have substantial issues in terms of timeliness, completeness, and accuracy,” explains Rosen, author of ‘The Safe Hiring Manual,’ a comprehensive guide to employment screening. “Because of the nature of databases, the appearance of a person’s name in a background check does not necessarily indicate that person is a criminal any more than the absence of a name shows that person has a clean record.” Rosen says database searches may contain both “false negatives,” where there is no criminal match with the person being checked but that person is a criminal, and “false positives,” where there is a criminal match with the person in the background check but upon further research it is not the same person. Rosen adds that any positive match – called a “hit” – must be verified by reviewing the actual court records from a courthouse. While background checks using database searches are useful as secondary tool, Rosen stresses that a professional background check should include county court level searches carried out by a professional accredited background check company or a licensed private investigator. “The bottom line is that any employer doing background checks should not be using an online service that does not include full FCRA assistance,” Rosen warns. The complimentary white paper ‘Background Check Mobile Phone Apps and Instant Background Check Web Sites: Fast and Easy, But Are They Accurate?’ is available on the Employment Screening Resources (ESR) website at: https://www.esrcheck.com/Download/. For more information about background checks, visit Employment Screening Resources (ESR) – ‘The Background Check AuthoritySM’ – at https://www.esrcheck.com/ or call ESR at 415-898-0044. Sources: http://www.ftc.gov/opa/2012/02/mobileapps.shtm. http://www.ftc.gov/os/2012/02/120207everifyletter.pdf.   http://www.ftc.gov/os/2012/02/120207infopayletter.pdf.  http://www.ftc.gov/os/2012/02/120207intelligatorletter.pdf. About Employment Screening Resources (ESR): Employment Screening Resources (ESR) – ‘The Background Check AuthoritySM’ – provides accurate and actionable information, empowering employers to make informed safe hiring decisions for the benefit for our clients, their employees, and the public. ESR literally wrote the book on background screening with “The Safe Hiring Manual” by Founder and CEO Lester Rosen. ESR is accredited by The National Association of Professional Background Screeners (NAPBS), a distinction held by less than two percent of all screening firms. By choosing an accredited screening firm like ESR, employers know they have selected an agency that meets the highest industry standards. For more information about Employment Screening Resources (ESR), visit https://www.esrcheck.com/ or call 415.898.0044. About ESR News: The Employment Screening Resources (ESR) News blog – ESR News – provides employment screening information for employers, recruiters, and jobseekers on a variety of topics including credit reports, criminal records, data privacy, discrimination, E-Verify, jobs reports, legal updates, negligent hiring, workplace violence, and use of search engines and social network sites for background checks. For more information about ESR News or to send comments or questions, please email ESR News Editor Thomas Ahearn at [email protected].]]>

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