On May 10, 2016, the Federal Trade Commission (FTC) released new guidelines for employment background screening companies for compliance with certain consumer reporting agency requirements of the Fair Credit Reporting Act (FCRA). The FTC’s guidelines are yet another indication that FCRA compliance is a top federal regulatory priority

I.    General Application of the FCRA

The FCRA’s provisions are directed principally at “consumer reports” and “consumer reporting agencies” (CRAs). As the FTC’s guidelines note, background screening reports and background screening companies typically fall within each of these respective categories, and as such are regulated by the FCRA. “So even if you don’t think of your company as a consumer reporting agency, it may be one if it provides information about people to employers for use in hiring or other employment decisions,” warns the FTC.

II.   FTC’s Guidelines

The FTC provided five specific guidelines for compliance with the FCRA.

  1. “Follow reasonable procedures to assure accuracy.” The FCRA requires CRAs to “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the [consumer] report relates.” Importantly, the FCRA is not a strict liability statute. The mere existence of an error in a consumer report does not, in and of itself, constitute a violation of the Act. Rather, a CRA’s liability hinges on the failure to follow reasonable procedures. According to the FTC, “if a report lists criminal convictions for people other than the applicant or employee – for instance, a person with a middle name or date of birth different from the applicant’s – that raises FCRA compliance concerns.” The FTC also notes that “[o]ther indications that a company’s procedures might not be reasonable include screening reports with multiple entries for the same offense or that list criminal records that have been expunged or otherwise sealed.”
  2. “Get certifications from your clients.” The FCRA additionally requires that CRAs provide consumer reports only to those with a specific permissible purpose, like employment. The FTC advises CRAs to obtain certifications from their clients, attesting to their permissible use of the report and compliance with the FCRA.
  3. “Provide your clients with information about the FCRA.” Specifically, background screening companies should provide clients with information about their obligations under the statute, which can be found here, and a summary of consumer rights under the FCRA, which can be found here.
  4. “Honor the rights of applicants and employees.” CRAs must also ensure that they timely respond to consumers’ inquiries and disputes and provide written notice of the results of any reinvestigations.
  5. “What if background screening reports include public record information?” If a CRA prepares a consumer report that contains public record information, such as courthouse records, the CRA must either: (1) notify the person who is the subject of the report when public record information is being reported; or (2) maintain “strict procedures” designed to ensure that reported public record data is complete and up to date.

III.  Conclusion

As evidenced by the Consumer Financial Protection Bureau’s (CFPB) October 2015 $13 million settlement with General Information Services, Inc. (GIS) and e-Backgroundchecks.com, Inc., FCRA regulatory enforcement, especially against background screening companies, is a regulatory priority. Companies in the industry should take heed.