CFPB Takes Action Against Two of the Largest Background Report Companies

The Fair Credit Reporting Act requires background check companies to use reasonable procedures to ensure maximum possible accuracy of the information in their background reports.  All too often, however, background report companies make errors in background reports and do not utilize reasonable procedures to ensure the accuracy of the information in their reports.  As a result, people lose jobs because background report companies publish inaccurate information about them, which employers rely on to make employment decisions.

On October 29, 2015, the Consumer Financial Protection Bureau (CFPB) announced that it is holding two of the nation’s largest background report companies – General Information Services and – accountable for publishing inaccurate information in their background reports about employment applicants. The CFPB is ordering GIS and to correct their procedures for ensuring accuracy, provide $10.5 million in relief to harmed consumers, and pay $2.5 million in civil penalties.

As part of its investigation, the CFPB found that GIS and failed to use basic procedures for matching public record information to the correct person. For example, GIS did not require employers to provide applicants’ middle names, and neither company had a policy for researching consumers with common names (e.g., Dave Smith).  As a result of their deficient procedures, GIS and frequently provided employers with inaccurate background reports that included criminal records attached to the wrong person, dismissed records, expunged records, and misdemeanors reported as felonies.  In fact, nearly 70 percent of the criminal history disputes that consumers filed with GIS over a two-year period resulted in some changes or corrections to the consumer’s report.

As part of its enforcement action, the CFPB is requiring GIS and to: (1) pay $10.5 million to negatively affected consumers (approximately $1,000 per affected consumer); (2) revise their procedure to ensure better accuracy going forward; (3) retain an independent consultant to review and assess the companies’ policies and procedures; (4) develop a comprehensive audit program to ensure the accuracy of their reports; and (5) pay a civil monetary penalty of $2.5 million.

A copy of the CFPB’s Consent Order is available here: Consent Order