Background Screening

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On June 25, the U.S. Court of Appeals for the Eighth Circuit issued a decision affirming summary judgment in favor of a consumer reporting agency (CRA) that allegedly issued an inaccurate consumer report by inadvertently including the subject’s twin brother’s speeding ticket in the background check report. The decision provides useful guidance on the standard for “reasonable procedures to assure maximum possible accuracy” under the Fair Credit Reporting Act (FCRA) and the circumstances under which a CRA may rely on official court records without further investigation.

Virginia is implementing a new Business Screening Services (BSS) program that will significantly change how private background screening companies handle Virginia criminal and traffic history records.

In this episode of FCRA Focus, hosts Kim Phan and Dave Gettings are joined by colleague Tim St. George to unpack major legislative developments impacting employment background screening. They discuss New York’s new statewide ban on the use of consumer credit history in most hiring and employment decisions, Virginia’s upcoming requirements for background screening businesses, and emerging federal proposals that could reshape FCRA liability, reseller obligations, and the reporting of criminal and credit information. The conversation highlights notable litigation trends, preemption and First Amendment issues, and practical steps for employers, CRAs, and resellers navigating rapidly evolving state and federal requirements.

Yesterday, the Federal Trade Commission (FTC) and the State of Arizona announced a joint action against Coulter Motor Company, an Arizona-based motor vehicle dealership, and its former general manager, for allegedly engaging in deceptive pricing practices and discriminatory financing treatment of Latino consumers. The complaint alleges violations of the FTC Act, the Equal Credit Opportunity Act, and the Arizona Consumer Fraud Act. The defendants have agreed to a $2.6 million settlement, most of which will be used to provide refunds to affected consumers.

On June 11, the Consumer Financial Protection Bureau (CFPB or Bureau) released a proposed rule amending Regulation V, which implements the Fair Credit Reporting Act (FCRA), concerning medical debt. The proposed rule would remove a regulatory exception that currently allows creditors to obtain and use information on medical debts for credit eligibility determinations. Additionally, the proposed rule would generally prohibit consumer reporting agencies (CRAs) from furnishing consumer reports containing medical debt information to creditors. Comments on the proposed rule are being accepted until August 12, 2024. The Bureau aims to finalize the rule by early 2025.

On May 2, the U.S. Department of Housing and Urban Development (HUD) released two sets of guidance addressing the applicability of the Fair Housing Act (FHA) to two areas where, in the agency’s view, algorithmic processes and artificial intelligence (AI) pose particular concerns: tenant screening and advertising of housing opportunities through online platforms that use targeted ads. The purpose of HUD’s guidance is to make housing providers, tenant screening companies, advertisers, and online platforms aware that the FHA applies to tenant screening and housing advertising, including when algorithms and AI are used to perform those functions.

In a recent speech at the National Consumer Law Center/National Association of Consumer Advocates Spring Training, Seth Frotman, General Counsel of the Consumer Financial Protection Bureau (CFPB or Bureau), focused on medical billing and collections and tenant screening and debt, emphasizing the CFPB’s enforcement of the Fair Debt Collection Practices Act (FDCPA) and Fair Credit Reporting Act (FCRA) in these areas.

Last week, the U.S. Department of Housing and Urban Development (HUD) issued a Notice of Proposed Rulemaking, seeking public comment on its proposal to amend existing regulations that govern admission to public housing and housing programs for applicants with criminal records and eviction or termination of assistance of persons on the basis of illegal drug use, drug-related criminal activity, or other criminal activity. The proposed rule would require that, prior to any discretionary denial or termination for criminal activity, public housing agencies (PHAs) and assisted housing owners take into consideration multiple sources of information, including but not limited to the recency and relevance of prior criminal activity. The proposed rule also seeks to clarify existing PHA and owner obligations and reduce the risk of violation of nondiscrimination laws.

We are pleased to share our annual review of regulatory and legal developments in the consumer financial services industry. With active federal and state legislatures, consumer financial services providers faced a challenging 2023. Courts across the country issued rulings that will have immediate and lasting impacts on the industry. Our team of more than 140 professionals has prepared this concise, yet thorough analysis of the most important issues and trends throughout our industry. We not only examined what happened in 2023, but also what to expect — and how to prepare — for the months ahead.

On January 11, the Consumer Financial Protection Bureau (CFPB or Bureau) issued two “advisory opinions” addressing the CFPB’s views of the obligations of consumer reporting agencies (CRAs) under the Fair Credit Reporting Act (FCRA). The advisory opinions are interpretive rules issued under the Bureau’s authority to interpret the FCRA pursuant to § 1022(b)(1) of the Consumer Financial Protection Act of 2010.