In early December, a California-based company that provides tenant screening reports to property management companies agreed to pay $4.25 million in a lawsuit. This came as part of a settlement with the Federal Trade Commission (FTC).
Details About the Lawsuit
Clients sought litigation after the agency failed to follow reasonable procedures to ensure the accuracy of reports on potential tenants. This is a direct violation of the Fair Credit Reporting Act (FCRA). More specifically, the U.S. Department of Justice (DOJ) filed a complaint on behalf of the FTC. The claim stated that the screening company failed to verify the accuracy of criminal and eviction records received by a third-party vendor. Additionally, they included records that were more than 7 years old in their reports.
Under the FCRA, companies that provide background screening reports must implement proper procedures. These procedures must ensure the “maximum possible accuracy” of information received from courts and research vendors. The FCRA prohibits information that is unverified, not pertinent to the report, or lies outside of the 7-year scope for searches.
Statement from the FTC
In a press release on the suit, Andrew Smith, the director of the FTC’s Bureau of Consumer Protection provided commentary. He stated that, “consumers face enough hurdles in obtaining housing without the additional burden of inaccurate background checks.” Smith also emphasized the necessity of providing accurate information. “All background screening agencies must follow reasonable procedures to ensure that the background reports that they provide to their customers are as accurate as possible.”
The Importance of Proper Procedures
In this case, the importance of verifying information from research vendors is brought to light. Every record on a background screening must report an appropriate number of identifiers to constitute a match. Often, if researchers are unable to obtain information directly from a source, they rely on a third party to perform the research for them. Researchers review records found through their own research.
However, records received from vendors must also review using the same procedures. Under this premise, successful background screening companies utilize live researchers to review every piece of information by a human eye. As a result, this serves to protect the agency. Additionally, it protects denying consumers from certain opportunities based on inaccurate information.
