Beware of Non-FCRA Online Background Screening Companies 23 Mar 2017


Definition of Non-FCRA Online Background Screening Companies: Non-FCRA Online Background Screening Companies offer the services of background check screening. But, many Non-FCRA Online Background Screening Companies run background checks in violation of the Fair Credit Reporting Act.

Suppose you are the new Lead Recruiter at your company. Your first task is to recruit and screen 2 new employees in the Accounting Department, and an Administrative Assistant for one of the Senior Managers. Of course, your HR Director told you to do as thorough a background check as possible. But, you should see if you can find an inexpensive way to do it. You find an online background screening company that promises to provide same information your employer receives from its current vendor. Surprisingly, it’s at a significantly lower price! Moreover, you don’t need to notify the applicants or obtain their consent beforehand. Sounds like a win-win? Maybe not…

You and the online company may be headed toward disaster. You may find yourself facing complaints and penalties from the Federal Trade Commission (FTC). On top of that, a big threat can be class action lawsuits that are yielding big payouts. Why? You just ran background checks in violation of the Fair Credit Reporting Act.

Real-life Examples of Non-FCRA Online Background Screening Companies

Beware of Non-FCRA Online Background Screening Companies!

Here are real-life examples:

  • InfoTrack paid a $35,000 settlement to Samuel L. Jackson and a $1 million penalty to the FTC after Mr. Jackson was denied a job based on an InfoTrack report. The report listed “possible matches”, three of which indicated a rape conviction belonging to a 58-year old African American male from November 18, 1987. Incidentally, he was incarcerated in Virginia at the time of the background check. The applicant was not even 4 years old at the time of the conviction. None of the matches had the same birth date as the candidate. InfoTrack admitted to reporting the information. Furthermore, they admitted that it did not provide notification to or receive consent from Mr. Jackson prior to running the background check.
  • Instant Checkmate paid $525,000 in civil penalties for providing information on a candidate’s current address, arrest, conviction, birth, marriage, divorce records, and for specifically marketing its services to landlords and employers. The FTC complaint alleges that Instant Checkmate violated the FCRA by “failing to maintain reasonable procedures to ensure that those using its reports had permissible purposes for accessing them; furnishing reports to users that it did not have reason to believe had permissible purposes to access them; and failing to follow reasonable procedures to assure that its reports were as accurate as possible.
  • Filiquarian Publishing Company owned an app available for 99 cents from app stores that could conduct a “quick criminal background check for convictions.” The company claimed to have access to “thousands of convictions”. They also claimed that users could conduct searches on potential employees as part of the hiring process. The FTC and Filiquarian entered into a Consent Order on May 1, 2013, ordering penalties of $16,000 for any violations of the Consent Order.

So, beware of Non-FCRA Online Background Screening Companies!

What’s a Consumer Reporting Agency?

Any company that assembles and evaluates information typically found in a consumer report is a CRA. Its purpose is to provide those reports to third parties. All three of the above companies meet the legal definition of a Consumer Reporting Agency (CRA). It matters not one bit if the company says it’s not a CRA. It doesn’t even matter that its information is not to be used in making an employment, credit or tenancy decision (as Filiquirian and Choice Level did). If the company – or app—in question looks and acts like a CRA, it’s a CRA. Therefore, it is subject to the FCRA. Note that this definition applies to third party agencies. In other words, employers who conduct their own background screening, without relying on a third party agency, are not CRAs. Hence, they would not be subject to the FCRA.

So what’s a consumer report? Consumer reports usually include information about a person’s character, criminal history, reputation, personal characteristics and credit history. Most often such reports are used to make employment, credit and tenancy decisions.

As shown by the above cases, problems occur when the online background screening company markets the information contained in the screening report, without acting as a CRA, and the employer then goes ahead and uses those reports.

What Does the FCRA Require CRAs to Do?

non-fcra online background screening companies

In a nutshell, the FCRA requires Consumer Reporting Agencies to:

  • Ensure Accuracy in Reporting, by establishing and following reasonable procedures. The FTC notes “certain practices” that may indicate a CRA is not following reasonable procedures. In particular, “if a report lists criminal convictions for people other than the applicant or employee”. For instance, it could be a person with a middle name or date of birth different from the applicant’s. That raises FCRA compliance concerns, or when the CRA provides “screening reports with multiple entries for the same offense or that list criminal records that have been expunged or otherwise sealed.”
  • Obtain Certifications for the Employer that the employer will comply with its FCRA obligations, which include, without limitation, that it: a) will only use the background report for employment purposes; b) has provided the necessary disclosure forms before running the background checks; and c) has obtained the applicants’ authorizations to order the background checks. In addition to the federal FCRA, some states have their own “mini-FCRAs”. They specifically impose these obligations on the employer to provide the certifications as well as on the CRA to collect them from the employer.
  • Respect the Consumer’s Rights: by giving applicants/employees access to their files if they request it, conducting reasonable investigations when the consumer disputes accuracy of information contained in the reports, and notifying them in writing of the results of such investigations. CRAs also may not place unreasonable obstacles in front of consumers attempting to exercise their FCRA rights.

What the Employer Must Do:

non-fcra online background screening companies

Employers who use CRAs to run background and credit checks must:

Obtain Written Consent: Employers must provide their applicants a Disclosure Form. It informs employees that it will run a background check and use information from it to make an employment decision. Employers must provide a separate Authorization Form, in which the employee expressly consents to the background check. Both forms should be signed by the employee.

Provide PreAdverse Action Notice: Prior to making any adverse job decision based on information in the report, employers must give employees a written notice of that possibility, their right to dispute any information in the report (as well as the CRA’s contact information for doing so) along with a copy of the report, a Summary of Rights under the FCRA;

Provide Adverse Action Notice: Assuming the applicant/employee either does not dispute any information in the report, or cannot substantiate the dispute, after waiting at least 5 days, the employer can reject the candidate, but must then provide an Adverse Action Notice, advising the candidate of the decision and the reason. The notice must include:

a. the name, address, and phone number of the consumer reporting company that supplied the report;

b. a statement that the company that supplied the report did not make the decision to take the unfavorable action and can’t give specific reasons for it; and

c. a notice of the person’s right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get an additional free report from the company if the person asks for it within 60 days.

This step may seem redundant after having given the candidate a pre-adverse action notice. But, skipping this step could mean penalties from the FTC or legal fees arising out of a class action lawsuit.

So, What’s the Moral of the Story?

Non-FCRA Online background screening companies and mobile apps offering similar services are subject to the Fair Credit Reporting Act. If you use them for employment screening and you do not ensure their, and your compliance with the FCRA, you act at your own peril. If you want a verified and trustworthy company to run a background check for you, make sure to visit Trusted Employees and get the best possible service!