Employment Background Screening Company to Pay $2.6 Million Penalty for Multiple Violations of the Fair Credit Reporting Act iReviewNow News – Federal Trade Commission

FTC Charges HireRight Solutions for Incorrectly Listing Criminal Convictions on Background Reports. HR, Legal Counsel, and Users of Background Checks find a solution to avoid the growing trend of increasing fines, litigation, and class-action lawsuits.

Athens, GA (Aug. 16, 2012) - A background screening company that provides pre-employment background reports to companies nationwide will be forced to pay $2.6 million to settle charges brought by the Federal Trade Commission. The FTC determined that the company, HireRight, violated the Fair Credit Reporting Act by failing to use reasonable procedures to assure the maximum possible accuracy of information it provided, failing to give consumers copies of their reports, and failing to reinvestigate consumer disputes, as required by federal law.

FTC FIRST-TIME ACTION: This case against HireRight represents the first time that the FTC has charged an employment background screening firm with violating the FCRA, resulting in the second-largest civil penalty that the FTC has obtained under the Act. ChoicePoint, which was acquired by LexisNexis, paid a $10 million civil penalty in 2006.

DEPARTMENT OF JUSTICE STEPS IN: The Department of Justice filed the complaint and proposed an order against HireRight on the FTC's behalf. Under the settlement, the company is also barred from continuing its alleged illegal practices.

In its capacity as a consumer reporting agency, HireRight provides background reports that contain information about prospective and current employees to help thousands of employers make decisions about hiring and other employment-related issues. Under the FCRA, the company's reports qualify as "consumer reports." They contain public-record information, including the individuals' criminal history.

INACCURACIES: The FTC alleged HireRight failed to take reasonable steps to ensure that the information in the reports was current and reflected updates, such as the expungement of criminal records. The FTC purports that due to these practices, employers received information that inaccurately and illegally listed criminal convictions.

REASONABLE PROCEDURES: In addition, according to the FTC's complaint, HireRight failed to follow reasonable procedures to prevent the same criminal offense information from being included in a report multiple times, failed to follow reasonable procedures to prevent obviously inaccurate information from being provided to employers, and in numerous cases even included records belonging to the wrong person. The FTC alleged that these failures led to consumers being denied employment or other employment-related benefits.

INSTANT ACCESS: Under the FCRA, consumer reporting agencies and employers using such reports must allow consumers to access their own information and dispute any inaccuracies contemporaneously to the time the user or employer receives the report. "iReviewNow by SecurTest is the only patented solution that meets the rigorous FCRA and new EEOC demands," says Steve Millwee, president, CEO, and inventor. To do this, the consumer reporting agency, employer or user of the report must clearly and adequately disclose information to the consumer or subject of the report, even when the report appears to contain no adverse information. Federal courts have also changed the standard 30 days allowed for the reinvestigation of disputes to a mere few days where a decision leads to an adverse impact on the subject. Employers should never deny or terminate employment, or give the job to another candidate, when a subject has disputed the accuracy of the report. Thus, an employer is wise to wait until the reinvestigation is completed before making a decision, even when he or she believes an equally or more qualified candidate has applied. SecurTest's iReviewNow system averages a one-day reinvestigation time and keeps the subject and employer in the loop as to its findings, thus negating claims of damages.

FAST REINVESTIGATION AND NOTIFICATIONS: Finally, the consumer reporting agency must notify consumers in writing of the results of reinvestigations within five days of completion, a once timely and costly process which has been automated by iReviewNow.

In numerous instances, HireRight Solutions failed to comply with these FCRA requirements, the FTC alleged. This includes failing to conduct reinvestigations of disputed items in a consumer's file after being notified of a dispute, requiring consumers who wanted to dispute information in their file to have a copy of the report before the company would start a reinvestigation, and telling consumers who did not have a copy of their report to request one before they would reinvestigate, delaying the dispute process and making it more difficult. In addition, according to the FTC, HireRight closed complaint investigations without providing written notice of the results to consumers, as required.

Finally, the complaint alleges that HireRight Solutions failed to provide consumers with written notification that it had reported public record information about them to employers at the same time that it was being reported, as the FCRA requires.

In addition to the $2.6 million civil penalty, the settlement prohibits HireRight Solutions from:

• failing to maintain reasonable procedures to ensure that its consumer report information is as accurate as possible • failing to provide consumers with information in their files in a timely manner • requiring consumers to obtain a copy of their report before the company will conduct a dispute reinvestigation • failing to provide consumers with the results of a dispute reinvestigation • failing to comply with the requirements for consumer reporting agencies that use public record information.

The Commission's vote to authorize the staff to refer the complaint to the Department of Justice and to approve the proposed consent decree, was 5-0. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the District of Columbia on August 8, 2012.

The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. This consent judgment is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the District Court judge. Pepsi recently settled a claim for $3.13 million brought by the EEOC over its background screening policies.

NO INSURANCE: Insurance carriers do not provide coverage for violations of law, such as the FCRA and EEOC. Thus, many risk managers and legal counsel are reviewing options that include background report providers and users of the reports have cash reserves in anticipation of litigation. The formula used is $100 to $200 in reserves for every background report completed, unless iReviewNow is used.

NOT THE FIRST TIME AND NOT ALONE: HireRight also recently settled an FCRA class-action lawsuit for $28 million, while still battling other federal lawsuits over its background reports. Counting attorney fees to the plaintiffs in the class-action settlement, the total cash paid by HireRight exceeded $50 million in a case earlier this year. LexisNexis, who has previously paid millions to settle similar federal litigation finds itself facing two new class-action lawsuits. General Information Services (GiS) is fighting for survival with three class-action FCRA lawsuits in a "Hail Mary" motion claiming the 40-year old Fair Credit Reporting Act is unconstitutional. The employer in one of the cases is the U.S. Postal Service, the very client and user of GiS reports.

The Federal Trade Commission has joined the Department of Justice and the Consumer Financial Protection Bureau in filing a memorandum brief in support of the constitutionality of the Fair Credit Reporting Act (FCRA), the 1970 law that is designed to protect the privacy of credit report information and ensure that the information supplied by consumer reporting agencies (CRAs) is as accurate as possible. In the filing, the government urges the federal district court to uphold an important provision of the FCRA, which has protected consumers' privacy for more than 40 years. Declaring war against its own client, the federal government, GiS's motion signals it may be the latest background screening company to fold if it settles the case or waits for a jury verdict. The cost to send class-action notices is expected to exceed $250 million if every consumer in GiS's proprietary database must be notified, which does not address the fines and attorney fees. The HireRight settlement suggests GiS could be headed to an unprecedented billion dollar outcome. The Commission vote authorizing the FTC to join in filing the brief was 5-0. The brief can be found on the FTC's website. It was filed on May 3, 2012, in the U.S. District Court for the Eastern District of Pennsylvania. (FTC File No. P082105; Docket No. 2:10-cv-06850-PBT (Shamara T. King on behalf of herself and all others similarly situated versus General Information Services, Inc.) Yet, the domino affect of these lawsuits have become the new tobacco class-action cases, according to the National Association of Professional Background Screeners counsel, as Assurant, Pinkerton, and many other background screening companies (and their clients) are under attack. These federal cases share important commonalities.

GiS appears to have provided the proverbial smoking gun that it relied on its internal database without verifying the accuracy of adverse information before releasing it to the Postal Service. "The prejudice caused by the erroneous reporting of outdated adverse public record information is exacerbated by Defendant's failure to notify the consumer contemporaneously of the fact that the erroneous outdated information is being sent to an employer or prospective employer, and Defendant's failure to maintain strict procedures to insure that adverse information it reports is accurate, complete and up to date and that outdated adverse public record information is removed from its reports," according to the federal class-action complaint.

Shamara T. King was sentenced to three years probation in a property crime case with 10 other charges being dropped by prosecutors. Seven years later Ms. King applied for employment with the U.S. Postal Service. The background report was not accurate, complete, or up to date. The report improperly disclosed the ten nolle prossed charges; it inaccurately stated a charge date; it failed to include the correct arrest date of February 3, 2000, which was contained within the actual public record.

THE DEVIL IS IN THE DETAILS: The second class-action case involving GiS is more troubling (Kerry Robinson on behalf of himself and all others similarly situated versus General Information Services, Inc., U.S. District Court Eastern District of Pennsylvania C.A. No. 11-Class Action 2: 2:11-cv-07782-PBT. ) On March 3, 2004, Robinson was arrested for Possession of a Controlled Substance. He was referred by the court to a program for probation "without a verdict," meaning he was not convicted of the offense. He successfully completed probation in 2007. The court issued an Expungement Order that Robinson's record be expunged from the Court of Common Pleas, Criminal Trial Division, for Philadelphia County on June 3, 2009. The court ordered the records also be expunged from the Philadelphia Police Department, Pennsylvania State Police, the First District Court of Pennsylvania, and Central Records of the Administrator of the Courts for the State of Pennsylvania. Evidence shows each of these entities expunged their records.

In December 2009, six months after the records were expunged, Mr. Robinson applied for a job with Aaron Rents. GiS provided a background report to Aaron Rents on December 23, 2009. GiS reported that Robinson was convicted of the 2004 drug charges, which raises several significant concerns. A current county or statewide criminal records check of Robinson finds no arrest or conviction records in Pennsylvania. Thus, GiS appears to have relied on its archived database that recorded the original charges in 2004, and failed to re-verify the records as required by the FCRA before reporting it to Aaron Rents. It is common for background screening companies to charge its clients for state and county searches. If GiS charged for these services in this case, it may find itself in deeper trouble with a host of fraud counts being added to the onerous class-action case. GiS cannot claim it re-verified the records since no records exist. Legal experts opine that the results of these class-action lawsuits, the recent new regulations released by the EEOC, and existing FCRA rules lead employers and users of background and consumer reports to only one solution, iReviewNow.

Many employers believe they are getting a national background check for around $7 to $10. The litigation has uncovered an ugly reality and possibly a longstanding dark secret. The evidence supports that some background screening providers in order to win the low-cost bidding war are only reporting records in their massive proprietary databases, rather than going to the best sources, such as county, state, and federal court records. Assuming a contract requires the provider to search county, state, and federal records as part of the background screening package and the provider is only using its database, the likelihood of civil and criminal fraud counts are looming. Fraud claims generally result in treble damage awards. Many HR executives, their legal counsel, and the industry are spending time and resources for a solution since such lawsuits and fines can impact their brand, much less their entire enterprise. The federal government and the private sector have found a new solution that mitigates, if not eliminates these risks.

IREVIEWNOW - THE DE FACTO STANDARD: Millwee's invention has become the de facto standard by the U.S. government, as it is the only system that meets the legal demands on background screening and other types of consumer reports:

Assessing Your Background Screening Provider	iReviewNow
Inaccuracies eliminated or instantly identified by subject if not caught by provider
Reasonable procedures to ensure FCRA and EEOC compliance
Instant access by the subject to his report
Fast reinvestigation before decision is made
Instant reporting of reinvestigation results
Tracking system that proves proper compliance was taken
Re-certification of conviction that is found in an archived proprietary database
Ability for subject to explain his past, ability for subject to present himself in the most favorable light by explaining positive steps for rehabilitation or self-improvement, and other factors that might give the user of the report steps to put the past in context to the present.

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SOURCES: Federal Trade Commission. Federal District Courts, EEOC www.securtest.com/2012 www.ireviewnow.com