|August 28, 2012|
Previously published on August 24, 2012
HireRight Solutions, Inc., an employment background screening firm that provides consumer reports to companies nationwide, will pay $2.6 million to settle Federal Trade Commission (FTC) charges that it violated the Fair Credit Reporting Act (FCRA).
HireRight was charged with failing to use “reasonable procedures to assure the maximum possible accuracy of information provided,” failing to give consumers copies of their reports, and failing to reinvestigate consumer disputes as required by law.
This marks the second-largest civil penalty obtained by the FTC under the FCRA. Only the $10 million civil penalty against a consumer data broker in 2006 was larger.It also is the first time the FTC has charged an employment background screening firm with violating the FCRA.
The FTC alleges that in many cases, when HireRight provided consumer reports to employers, it did not take reasonable steps to ensure the information was current and reflected updates, such as expunged criminal records. Employers, therefore, sometimes supposedly received information that incorrectly listed criminal convictions on individuals’ records. Finally, the complaint alleges that HireRight failed to provide consumers with written notification that it had reported public record information about them to employers when it was being reported, as the FCRA requires.
Nuts and Bolts
This settlement is a reminder of the highly regulated nature of employment background screening. The FCRA contains numerous procedural and technical requirements that require careful attention to ensure compliance.
As a result of Dodd-Frank, much of the primary enforcement authority for the FCRA has been transferred to the Consumer Financial Protection Bureau. However, the FTC retains enforcement authority under Section 5 of the FTC Act to the extent that regulatory authority has not been expressly transferred to another agency. As a general proposition, FCRA regulatory authority was transferred to the CFPB as to “financial institutions.”
While many consumer reporting agencies providing consumer reports for use in financial transactions are subject to the CFPB as they are deemed “financial institutions,” HireRight provides consumer reports for employment purposes, and therefore fell into the retained FTC authority. It is important to note that other businesses that may not be subject to the CFPB - such as non-financial institutions that use consumer reports for hiring decisions - may nevertheless be subject to FTC jurisdiction for FCRA enforcement.
Given the large loss of regulatory authority in some areas to the CFPB, it may be that the FTC will have deeper focus on the areas that it has retained, such as enforcement of the FCRA as to entities not within the CFPB’s ambit. In sum, the HireRight settlement may reflect an across-the-board heightened regulatory environment. Those businesses that take solace in escaping the CFPB may have to contend with a more focused FTC instead.