In a case with important positive implications for banks conducting federally-required background checks on job applicants and employees, in Amanda Mix v. JPMorgan Chase, No. 2:15-cv-01102-JJT, the United States District Court for the District of Arizona granted JPMorgan Chase’s summary judgment motion on Plaintiff’s background screening class action. Plaintiff claimed that Chase violated the Fair Credit Reporting Act when it conducted FBI background reports without using FCRA-compliant consent and disclosure forms. Chase uses an authorized FBI-channeler to obtain its FBI background checks on the banks’ employees and contingent workers in order to comply with its own federal obligations governing employee qualifications, and contended that the background checks were not governed by the FCRA because neither the FBI nor the channeler met the definition of a “consumer reporting agency” regulated by the FCRA. Specifically, Chase argued that the FBI rap sheets it receives through its authorized FBI channeler are not consumer reports because the channeler does not assemble or evaluate the information, but instead passes the unadulterated information from the FBI to Chase as a conduit.

Plaintiff advanced various policy arguments about why the data should be governed by the FCRA and also argued that because Chase’s FBI-approved channeler was a subsidiary of a CRA, its conduct was necessarily governed by the FCRA. The Court rejected these arguments and instead adopted Chase’s position to find that the FCRA did not apply.

The Court found that Chase successfully demonstrated the “absence of a genuine dispute as to whether [Chase’s FBI-approved channeler] is a CRA in its normal activities as well as in the transaction at issue.” Specifically, the Court reasoned that Chase’s approved channeler was “akin to an agent acting at the behest of its principals—[Chase] and the FBI; therefore, as an agent without control over its principals’ employment decisions [the channeler] is not a CRA.”

Banks operate under a number of federal requirements to conduct background checks on employees. This opinion confirms that FBI-background checks, relied on by many financial institutions in accordance the federal requirements, may not be subject to the FCRA disclosure requirements, especially where they are conducted through the use of an authorized-FBI channeler.

The opinion contains favorable law for consumer reporting agencies as well. The opinion lends support that the definitional inquiry into whether an entity acts as a consumer reporting agency should be determined on a transaction-based analysis, and therefore the fact that the entity has an affiliate, or itself, has FCRA-lines of business does not mean that every part of the business is subject to the FCRA.

Troutman Sanders attorneys Alan Wingfield, John Lynch and Meagan Mihalko represented Chase.