2 Background Check Providers to Pay $5.8 Million Over Inaccurate Reports

The FTC is making two background check report providers pay $5.8 million to settle charges they deceived consumers over criminal reports

The Federal Trade Commission (FTC) will require background check report providers TruthFinder and Instant Checkmate to pay $5.8 million to settle charges that they deceived consumers about whether consumers had criminal records, according to a release. Both companies are owned by PeopleConnect.

The FTC charged the companies violated the Fair Credit Reporting Act (FCRA) by operating as consumer reporting agencies while, among other things, failing to ensure the maximum possible accuracy of their consumer reports.

The companies had advertised and marketed themselves as “best background check for landlords” according to the complaint, for landlords doing background screening checks on tenants.

Earlier this year, the FTC and the Consumer Financial Protection Bureau (CFPB) asked for comment on tenant background screening checks especially use of criminal and eviction records and algorithms

“Companies that compile personal information and sell background reports are on notice: Don’t make false claims about the contents of your reports,” said Samuel Levine, director of the Bureau of Consumer Protection, in the release.

“And, if you market your reports to be used to screen tenants or employees, you are a consumer reporting agency and you must follow the requirements of the FCRA.”

Earlier this year, Samuel Levine, Director of the FTC’s Bureau of Consumer Protection said,  “No one should be shut out of housing because of inaccurate or unfair background screening practices. We are proud to be part of a whole-of-government effort to ensure fairness and equity in the rental market, and we are looking forward to hearing from the public on this vital issue.”

“Error-ridden background checks are increasingly used by corporate landlords to deny housing to Americans,” Rohit Chopra, Director of the CFPB, said earlier this year. “We will continue to work together to protect the integrity of our credit reporting system from sloppy background check companies.”

California-based Instant Checkmate and TruthFinder market people-search services, allowing users to search unlimited background reports on individuals, and charge monthly subscription fees to view the full reports. In 2014, Instant Checkmate agreed to settle FTC charges that the company previously violated the FCRA by failing to take reasonable steps to make sure that its background reports were accurate and that its users had a permissible reason to have them.

In a complaint, the FTC says Instant Checkmate and TruthFinder made millions from their monthly subscriptions using push notifications and marketing emails that claimed that the subject of a background report had a criminal or arrest record, when the record was merely a traffic ticket. All the while, the companies touted the accuracy of their reports in online ads and other promotional materials, claiming that their reports contain “the MOST ACCURATE information available to the public.” The FTC says, however, that all the information used in their background reports is obtained from third parties that expressly disclaim that the information is accurate and that Truth Finder and Instant Checkmate take no steps to verify the accuracy of the information.

The companies also deceived customers by providing “Remove” and “Flag as Inaccurate” buttons that did not work as advertised, according to the complaint. The “Remove” button removed the disputed information only from the report as displayed to that customer; however, the same item of information remained visible to other customers who searched for the same person. In addition, the FTC also says that, when a customer flagged an item in the background report as inaccurate, the companies never took any steps to investigate items flagged by consumers as inaccurate, to modify the reports, or to flag to other customers that the information had been disputed.

Despite disclaimers on their websites, according to the complaint, TruthFinder and Instant Checkmate have operated as consumer reporting agencies (CRAs) because they have assembled and evaluated information on consumers into background reports and have marketed and sold those reports for employment and tenant-screening purposes. And, as CRAs, they were required to comply with the FCRA. For example, the complaint charges that the companies used search-engine advertising keywords that relate to employment and tenant screening, such as “best background check for landlords” and “pre-employment screening.” The FTC noted that Instant Checkmate was already under an FTC order for engaging in similar conduct, which implicated it as a CRA, and therefore was aware that it was required to comply with the FCRA.

The FTC says that, in addition to failing to ensure the accuracy of their reports, the companies violated the FCRA by providing background reports to people who did not have a permissible purpose to obtain them and failing to implement reasonable procedures to limit who could obtain their background reports. The FTC also says the companies failed to investigate and respond to consumer complaints about inaccuracies in their reports, as required by the FCRA.

TruthFinder and Instant Checkmate tried to increase the number of positive user reviews, and decrease the prominence of negative user reviews, by offering customers one free premium background report in exchange for posting a review of their products on the review site HighYa, which warns that such practices violate the site’s terms and conditions, according to the FTC. TruthFinder and Instant Checkmate, however, failed to advise customers to disclose that they were being compensated for their review.

Under the proposed order, which must be approved by a federal judge before it can go into effect, TruthFinder and Instant Checkmate and their affiliated companies will be required to pay a $5.8 million penalty.

Read the full FTC release here.

Tenant Background Screening Checks Under Federal Scrutiny

Sign Up For Our Weekly Newsletter And Get Rental Property And Apartment News And Helpful, Useful Content Each Week.

* indicates required