WASHINGTON–The Federal Trade Commission said it will require background report providers TruthFinder and Instant Checkmate to pay $5.8 million to settle charges that they deceived consumers about whether consumers had criminal records and that the companies violated the Fair Credit Reporting Act (FCRA).
The violations involved operating as consumer reporting agencies while, among other things, failing to ensure the maximum possible accuracy of their consumer reports, the FTC said.
According to the FTC, 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.
Settlement of a Decade Ago
In 2014, the FTC noted 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 stated 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.
Not the “MOST ACCURATE’
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.
The FTC added, 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 FTC said. “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.”
Steps Never Taken
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,” the FTC said. “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’.”
Additional Issues
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 further said:
- 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 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.
The Proposed Order
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, FTC said.
Other provisions of the order:
- Require the companies to establish and implement a comprehensive monitoring program to regularly review, assess, and determine the extent to which each of the companies are operating in whole or in part as a CRA and to ensure that they are complying with the requirements of the FCRA
- Permanently prohibit them from failing to comply with the FCRA when they are operating as a CRAs
- Permanently prohibit them from misrepresenting the accuracy of their reports or making similar misrepresentations as outlined in the complaint
- Require them to mandate that endorsers disclose any material connections and to monitor any endorsers who have a material connection to the company to ensure they are disclosing such connections.
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