Employers that use consumer reporting agencies to conduct background checks should be absolutely sure the provider operates in a compliant manner, particularly regarding the Fair Credit Reporting Act (FCRA). Failure to do so will warrant federal investigation and punitive measures for the agency that can reflect badly on businesses that used its services, as a recent case demonstrates.
Mobile background check firm settles with FTC
The Federal Trade Commission (FTC) announced it had reached a settlement with Filiquarian Publishing LLC, and Choice Level LLC over charges that the companies and their CEO, Joshua Linsk, marketed themselves as a consumer reporting agency. However, the companies were found to not have taken consumer protection measures mandated by FCRA.
The FTC alleged they did not ensure the information gathered in background checks was accurate and used only for legally permissible purposes. Filiquarian and Choice Level also failed to heed FCRA stipulations and did not notify users of their criminal record reports, including the requirement to inform consumers if an adverse action was taken based on the resulting report.
According to an FTC complaint, Filiquarian claimed users could access hundreds of thousands of criminal records through its mobile apps. The records themselves were provided by Choice Level. The issue’s sticking point, however, is the fact both companies included disclaimers stating they were not FCRA compliant and their products were not designed to be legitimate pre-employment screening tools.
Yet, the FTC did not view the presence of a disclaimer as enough action to avoid liability in regard to FCRA, specifically because the companies marketed their services as viable employment HR products.
By law, a company is considered a consumer reporting agency if it utilizes consumer reports for the purpose of providing said information at the request of a third party.
Settlement requires compliance reporting
As part of the terms to the settlement, Filiquarian and Choice Level were ordered to provide the FTC with business records showing their compliance for the next five years.
The settlement also prohibited the companies from furnishing a consumer report to anyone they had reason to believe would not use the report for a “permissible purpose.”
The case is also a landmark one for the FTC, as it resolves the first complaint with mobile apps. Customers who paid 99 cents to download an app from Filiquarian through iTunes or the GooglePlay Android app store could conduct an unlimited number of criminal record searches.
Background checks are an integral function to the employment process. But employers also have to be alert to the compliance measures of consumer reporting agencies they work with. Failure to adhere to FCRA guidelines can mean public relation disasters for both parties.
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