On October 29, 2015, the Consumer Financial Protection Bureau (CFPB) announced the settlement of an enforcement action against two of the country’s largest employment background screening report providers for failing to comply with provisions of the Fair Credit Reporting Act (FCRA).
The two companies at issue collectively generate and sell more than 10 million reports about individual job applicants each year to prospective U.S. employers. As such, they are Consumer Reporting Agencies (CRAs) under the FCRA and are required to ensure the accuracy of the reports they provide.
In a consent order, the CFPB found that, in violation of Section 607(b) of the FCRA, 15 U.S.C. § 1681e(b), the companies failed to follow reasonable procedures designed to ensure maximum accuracy of the information they reported. For instance, the CFPB concluded that the companies: 1) did not have written procedures for researching public records for consumers with common names, 2) did not require employers to provide middle names, 3) failed to track consumer disputes in a manner that would allow for the identification and remedy of reporting error trends, and 4) failed to conduct sufficient testing of non-disputed records. As a result, the CFPB concluded that the companies were providing reports with inaccurate criminal information histories. The CFPB also concluded that the companies violated Section 607(b) of the FCRA, 15 U.S.C. § 1681e(b), which prohibits CRAs from reporting on civil suits, civil judgments and arrest records that predate a background report by more than seven years.
As a result of these violations, the companies were required to pay $10.5 million to consumers negatively affected by their inaccurate reports, and also pay a civil fine of $2.5 million. Additionally, the companies were required to hire an independent consultant to help review and revise their FCRA compliance policies and procedures.
The FCRA regulates not only CRAs, but also the conduct of companies that supply information to or use information from CRAs. Accordingly, while this enforcement action was directly aimed at employment background screening report providers and CRAs more generally, the consent order is a warning to all companies subject to the FCRA of the importance of ensuring accurate reporting and compliance with FCRA rules and regulations.