The Federal Trade Commission warned several mobile app makers that their products may be consumer reports. According to the FTC’s website, these app makers all performed instant database checks into individual’s criminal histories. The FTC noted that this information, if used for employment purposes, is a consumer report. The FTC placed no weight to the presence of a disclaimer on an app that it is not for employment purposes. Instead, the FTC said it would look to indications of actual use, such as where the mobile apps were advertised and who was on the app-makers’ customer lists.
This is critical for employers who use anything other than a regulated consumer reporting agency for their background reports. The FTC and private plaintiffs’ lawyers may hold employers liable for using services similar to these (whether mobile apps or websites) in violation of the Fair Credit Reporting Act. The FTC points out that a consumer report is a consumer report, regardless of whether the companies providing or obtaining it think so. The FTC is absolutely correct.
At a minimum, the FTC and plaintiffs’ lawyers would be able to show a violation of 15 U.S.C. § 1681b(f)(2), which prohibits anyone from obtaining a consumer report without having first certified to a consumer reporting agency the purpose for which the report will be used. Most likely, they would also be able to show a violation of:
· 15 U.S.C. § 1681b(b)(2), which prohibits anyone from obtaining a consumer report for employment without having first told the subject that that it will obtain a consumer report and having obtained the subject’s authorization;
· 15 U.S.C. § 1681b(b)(3), which requires anyone intending to take adverse action based on a consumer report obtained for employment purposes to give a specific notice before taking that action, and
· 15 U.S.C. § 1681m, which requires anyone who takes adverse action based on a consumer report to give a further notice about the action.
It seems probable that the FTC would show this to be a knowing violation, which would entail civil penalties of up to $3,500 per violation. More significantly, plaintiffs’ lawyers would show this to be willful, which means that the employer would be liable for $100 to $1,000 per violation, plus actual damages, plus punitive damages, plus attorney’s fees.
Using a regulated consumer reporting agency like backgroundchecks.com avoids this particular problem. More importantly, it assures employers that the reports on which they make critical hiring decisions were prepared by a responsible agency using processes designed to produce accurate, complete, up-to-date reports. When another service – whether mobile or web – disclaims the FCRA, that is a sign that the report may be too unreliable to be used for hiring.
About Michael Klazema The author
Michael Klazema is Chief Marketing Technologist at EY-VODW.com and has over two decades of experience in digital consulting, online product management, and technology innovation. He is the lead author and editor for Dallas-based backgroundchecks.com with a focus on human resource and employment screening developments.