Fair Credit Reporting Act (FCRA)

Written By ESR News Blog Editor Thomas Ahearn

On July 27, 2020, the U.S. Department of Justice (DOJ) filed a complaint on behalf of the Federal Trade Commission (FTC) alleging that a California-based purveyor of background reports deceived consumers with “teaser background reports” that falsely claimed to include information about arrest, criminal, and sex offender records in violation of the Fair Credit Reporting Act (FCRA), according to a press release from the FTC.

According to the complaint filed in the U.S. District Court for the Central District of California, the purveyor of background reports and its CEO have stated through their website that the company’s background reports on particular individuals may contain arrest, criminal, and sexual offender records – even when they did not include such information – to try to persuade consumers to sign up for auto-renewing premium subscriptions.

The complaint alleged that consumers searching the website for an individual’s background report were shown search results that implied, often falsely, that the subject of a search may have records of criminal or sexual offenses – records that can be viewed only by buying a subscription. The misleading statements led consumers to believe they or other individuals had arrest or criminal records when they did not, or had minor offenses.

The complaint maintained that the purveyor of background reports was a Consumer Reporting Agency (CRA) that assembled and sold consumer reports that included information such as court or arrest records and sex offender records. The CRA claimed in testimonials that its background reports were useful to those making housing, lending, and employment eligibility decisions, according to the FTC press release.

The FCRA requires CRAs to only provide consumer reports to those with a “permissible purpose” for receiving it, ensure maximum possible accuracy of information, and allow consumers to dispute and correct information in consumer reports. The complaint alleged the CRA violated the FCRA by failing to verify how reports would be used, ensure accurate information, and make sure information was used for legally permissible purposes.

“The Department of Justice is committed to working with the FTC to protect consumers from deceptive sales practices and from so-called credit reports that may contain inaccurate information and be used for improper purposes,” Acting Assistant Attorney General Ethan P. Davis of the Department of Justice’s Civil Division stated in a press release from the DOJ about the filing of the complaint.

The complaint seeks a permanent injunction to prohibit the defendants from future violations, as well as monetary civil penalties and relief to redress injury caused to consumers. The DOJ and FTC also remind consumers that a complaint is merely a set of allegations that, if the case were to proceed to trial, the government would need to prove by a preponderance of the evidence.

Enacted by Congress in 1970, the FCRA 15 U.S.C § 1681 promotes the accuracy, fairness, and privacy of consumer information contained in the files of CRAs, protects consumers from the willful and/or negligent inclusion of inaccurate information in their consumer reports, and regulates the collection, dissemination, and use of consumer information, including consumer credit information.

Employment Screening Resources® (ESR) – a leading global background check provider founded in the San Francisco, California area in 1997 – offers FCRA-compliant background screening solutions and white papers on how employers may avoid FCRA lawsuits and how CRAs may avoid FCRA lawsuits. To learn more about background check services from ESR, visit www.esrcheck.com.

NOTE: Employment Screening Resources® (ESR) does not provide or offer legal services or legal advice of any kind or nature. Any information on this website is for educational purposes only.

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