It is clear to the PRC that the problems of flawed background checks is not new to the FTC. It is also our belief that this is a critical area of consumer protection that deserves the increased attention of the FTC. Our analysis of FTC data uncovered numerous instances of complaints against the same company for reporting inaccurate data, often concerning criminal activities; failure to follow FCRA requirements for limiting information reported; and difficulty in getting the misinformation corrected.
Two easily identifiable problems with the increased use of background checks are the potential for errors and past mistakes haunting people for far too long. But, in addition to these problems, there are societal concerns about lack of privacy, ceding judgment to a computer database, and potential over-reliance on a person’s past behavior.
News stories report an increase in employers who "google" prospective employees. The employer thinks of this as a cheap and convenient background check. Unfortunately for the job applicant, this type of background check is not covered by the Fair Credit Reporting Act (FCRA).
We have heard from several individuals who have described their experiences with background checks that retrieve wrongful criminal records. Even after they have informed the employer that the background report is in error, they've learned that it's too late. The employer has moved on to another applicant, or perhaps is so risk-averse that the employer does not want the hassle of dealing with someone with a tarnished record, even though it's erroneous.
When it comes to privacy, consumer expectations and fears are most elevated for sensitive data included in medical records. A major concern is potential secondary uses of medical information. For example, a consumer may understandably be concerned that a medical condition could adversely affect the ability to get a job or a mortgage. In recent amendments to the Fair Credit Reporting Act (FCRA), Congress acted to address the discriminatory use of medical information in credit transactions.
The FTC this week announced a lawsuit and simultaneous settlement with Consumerinfo.com, a subsidiary of the credit bureau Experian, and freecreditreport.com, companies that advertise free credit reports. The FTC charged the companies with "deceptive and misleading" claims.
Consumerinfo.com and freecreditreport.com advertised "free credit reports," but failed to inform consumers that they were automatically signing up for credit report monitoring services and would be charged $79.95 if they did not cancel within 30 days.
The goal of the Disposal Rule is to reduce identity theft and other fraud through greater protection of consumer information. The rule applies to consumer reporting agencies like credit bureaus, employment or tenant screening companies, as well as companies that compile information and sell reports on medical history, check writing history and insurance claims. Significantly, the Disposal Rule also applies to any business that uses such reports.
Irresponsible handling of sensitive consumer data has long been cited as a contributing factor to identity theft. A practice known as "dumpster diving" is often claimed by thieves themselves as the source of the data that allowed them to commit the crime. Sensitive data discarded by a financial institution provides a prime opportunity for a crook to access another's personal data.
By enacting §216 requiring proper disposal of consumer information, Congress has given the public one of the strongest tools yet in combating the growing crime of identity theft. It is now up to the financial regulators and the FTC to carry out Congress' intent by adopting strong regulations to ensure identity theft is no longer fed by careless and irresponsible disposal of confidential consumer data.
The proposed rule generally prohibits a creditor from obtaining and using medical information for making decisions about a consumer's credit eligibility. The rule then makes an exception that allows creditors to obtain and use financial information that happens to be related to medical debts, expenses and income.
