Alert January 22, 2013

FTC Settles First Mobile Application-Related Fair Credit Reporting Act Case

The FTC announced a settlement with companies that provided criminal background checks through a mobile application and failed to comply with the Fair Credit Reporting Act. The FTC's complaint alleged that the companies advertised that the mobile application could be used by employers to perform criminal background checks on prospective employees. In an apparent attempt to end-run their obligations under the FCRA, the companies used disclaimers that their products were not FCRA compliant; should not be used as screening tools; and that any person using the mobile application “assume[d] sole responsibility for compliance with the [FCRA] and all/any other applicable laws.”  Significantly, the FTC rejected the use of such disclaimers, noting that “these disclaimers are not enough to avoid liability under the FCRA because the company advertised and expected that its reports could be used for employment purposes.”

Pursuant to the consent order, the companies are prohibited from, among other things, (1) furnishing credit reports to any person that they do not believe has a permissible purpose under the FCRA; (2) failing to maintain reasonable procedures to assure the accuracy of the information concerning an individual to whom a consumer report relates and (3) failing to provide the required notices to users of consumer reports and furnishers of consumer report information. The consent order is open to public comment until February 11, 2013.