A mobile app maker violated the Fair Credit Reporting Act (FCRA) by claiming that users of its apps could gain access to hundreds of thousands of criminal records without following other requirements of the statute, according to the Federal Trade Commission.

The agency brought charges against Filiquarian Publishing, Choice Level LLC (a related company that provided the criminal records accessed via Filiquarian’s apps), and Joshua Linsk, the CEO of the companies, for failing to ensure that the information they sold was accurate and would be used only for legally permissible purposes as required by the FCRA.

Pursuant to the FCRA, credit reporting agencies (companies that supply reports for credit, employment, housing, and insurance applications) must take reasonable steps to ensure the accuracy of their reports and provide consumers with the right to challenge information contained therein. In addition, companies cannot provide data unless the recipient intends to use it for a “permissible purpose” under the Act, such as decisions relating to credit, employment, and housing applications.

The FTC complaint alleged that defendants failed to meet these statutory requirements despite the fact that they acted as CRAs under the Act.

The agency alleged that Filiquarian told consumers to use its mobile apps to access “hundreds of thousands of criminal records” and conduct searches on potential employees. Marketing for the apps included statements such as “Are you hiring somebody and wanting to quickly find out if they have a record? Then Texas Criminal Record Search is the perfect application for you.”

For 99 cents, users could conduct an unlimited number of searches for criminal records within a particular state or county. Between 2010 and last May, approximately 7,000 copies of Filiquarian’s apps were sold on iTunes and GooglePlay.

The defendants “regularly” provided those purchasers with reports without checking them for accuracy and failed to ascertain whether app users had a permissible purpose under the FCRA, the FTC said.

The defendants also failed to inform users of the apps that they are required under law to notify individuals if an adverse action was taken against them based on information in a report.

Although Filiquarian posted disclaimers that it was not FCRA compliant, that its products should not be considered screening products for employment, insurance, and credit screening, and that anyone who used their reports assumed sole responsibility for FCRA compliance, the agency said these disclaimers were insufficient to overcome the express representations in its advertisements that the reports could be used for employment purposes.

Under the terms of the consent order, the defendants are barred from providing reports to anyone they do not have reason to believe has a “permissible purpose” to use the report. In addition, the companies will provide report purchasers with information about their obligations under the FCRA and will take reasonable steps to ensure the “maximum possible accuracy” of the information in the reports.

To read the complaint and the consent order, click here.

Why it matters: The case underscores the agency’s attention to potential violations of the FCRA, particularly in the context of mobile apps. Last year, the FTC sent warning letters to six marketers of background check mobile applications, in which they cautioned compliance with the FCRA if their reports were being used for employment or other FCRA purposes. This settlement also illustrates that the agency will not hesitate to find that companies act as CRAs and violate the FCRA based on their actions, even where they expressly deny that they are a CRA or FCRA compliant.