Showing its continuing regular focus on the background screening industry, on October 3, 2019, the Consumer Financial Protection Bureau (CFPB) published a report, entitled Market Snapshot: Background Screening Reports. The report highlights the increased demand for background screenings by employers as well as consumer challenges that may arise from their use given the vast array of data sources and consumer reporting agencies. The report follows an announcement by the Federal Trade Commission (FTC) and CFPB of a joint workshop to be held in December 2019 on issues affecting the accuracy of both traditional credit reports and employment and tenant background screening reports. The workshop will include industry representatives, consumer advocates, and regulators. While the CFPB report does not explicitly indicate future regulatory action, it underscores regulators’ interest in oversight of the background screening industry.

Summary of the Report

The report details common reporting challenges that can result in adverse outcomes for consumers, especially as it pertains to reporting criminal records. Challenges highlighted include:

  • Inconsistent systems for information collection across sources. For example, court systems’ access to public records, including criminal records, may vary among jurisdictions. Courts also may use varying terminology to describe the same public record.
  • The lack of unique identifying information which can result in improperly affiliating consumers with someone else’s information. In other words, some courts impose policies relating to redacting personal identifying information on public records, which makes it more difficult to match a particular consumer to a record and thus can lead to false matches.
  • Duplicative reporting of criminal records, which results in multiple listings of the same convictions or arrests, leaving the impression a consumer has multiple offenses.
  • Out of date, expunged, or sealed criminal information. For example, expunged records pose a particular problem because it is typically difficult to determine based on court records which cases have been expunged.
  • The inability of consumers to review reports or the underlying information prior to the information being received by employers. Given that there are several thousand background screening firms that employers may use, consumers likely cannot identify the specific firm that a particular employer may use. Even if the background screening firm can be identified, the firm may not have information on the consumer or may not be able to provide the same information to the consumer as provided to the employer.
  • Delays in updating information possessed by consumer reporting agencies. If, for example, an error exists in a court record itself, the process for the consumer to resolve the error varies by court and can be difficult and time-consuming.

In the report, the CFPB also touches on three recent developments in consumer reporting accuracy. First, the report highlights how background screening firms are utilizing technology involving machine learning and greater access to consumer data to verify identities and match criminal records. According to the report, companies may use staff or algorithmically driven database searches to determine whether there is a “hit” in the database.

Second, the report references new and expanded state expungement laws, which expand criminal records eligible for expungement. It notes a recent Pennsylvania law that requires that certain offenses be automatically sealed from public view after 10 years. Further, it references the adoption by Minnesota and Pennsylvania of the “lifecycle file”—an agreement by subscribers of those states’ contracts for bulk data purchases to update files on a near real-time basis with court records that reflect expungement and other events. Subscribers are also subject to court audits of their data.

Finally, the report states that as of early 2019, 35 states, the District of Columbia, and over 150 cities and counties, have adopted a “Ban-the-Box” or similar law that prohibits prospective employers from inquiring about an applicant’s criminal history until after an initial offer has been made. According to the report, the background screening industry has expressed concern regarding inconsistent variations of policy on the state and local level.

Key Takeaways from the Report and Proposed Workshop

The report provides a general overview of consumer report accuracy issues. While it does not provide any specific CFPB guidance, it does highlight the agency’s interest and concerns with respect to accuracy in consumer reports. Background screening companies should carefully review the challenges highlighted by the CFPB as they could be the subject of future regulatory action.

Troutman Sanders LLP will continue to monitor changes in the regulatory landscape, and it will further report on any further developments in this regard, including after the December FTC/CFPB workshop.