Today, the Federal Trade Commission (FTC) filed a complaint in San Diego federal court against a group of San Diego-based background check companies, alleging that they provided inaccurate background reports and misled users. TruthFinder and Instant Checkmate, the companies behind these services, now face a potential $5.8 million penalty for the aforementioned charges and for violating the Fair Credit Reporting Act (FCRA). According the FTC, the companies allegedly profited millions from their monthly subscriptions by making false claims about the contents of their reports.
The complaint states that TruthFinder and Instant Checkmate not only failed to take steps to ensure their background reports' accuracy but also neglected to investigate disputes made by users who flagged the reports as inaccurate. Moreover, the FTC accuses the companies of using misleading marketing methods to entice customers. Users received emails and notifications claiming that the subject of a background report had a criminal or arrest record when, in reality, the record was merely a traffic ticket.
FTC's findings also revealed that the "Remove" and "Flag as Inaccurate" buttons on the companies' websites did not function as advertised. Although disputed information would be removed for a specific user who utilized the feature, other customers could still view the disputed information. Furthermore, the companies provided background reports to individuals without "permissible purposes," which the law only allows for specific uses like employment purposes or other legitimate business reasons.
Samuel Levine, director of the FTC's Bureau of Consumer Protection, emphasized in a statement that, "Companies that compile personal information and sell background reports are on notice: Don't make false claims about the contents of your reports." Both TruthFinder and Instant Checkmate have a history of FCRA violations. Instant Checkmate previously settled FTC charges in 2014 for allegedly failing to take reasonable steps to ensure the accuracy of its background reports and not verifying users' permissible reasons for obtaining the reports. The FTC press release notes that the companies used search engine advertising keywords related to employment and tenant screening, such as "best background check for landlords" and "pre-employment screening."
The proposed order, which still requires a federal judge's approval, aims to address the concerns raised by the FTC. Along with the $5.8 million penalty, the order would require TruthFinder and Instant Checkmate to establish and implement a comprehensive monitoring program to ensure compliance with the FCRA and to prevent misrepresentations of their reports' accuracy. Furthermore, the order would mandate that endorsers disclose any material connections to the company and monitor those with a material connection to guarantee proper disclosure.
