Archive for August, 2012

New York Times on “Accuracy in Criminal Background Checks”

August 31, 2012 1 comment

The New York Times recently published an editorial in which it applauded the federal government for sanctioning HireRight Solutions, one of the larger criminal background reporting services.  The editorial is long on rhetoric and short on facts – we are told that the sanctions were $2.6 million, but not what HireCheck did or what it did wrong.  Nor is there any support for claims that “federal and state governments need to do more to protect people from this industry.”

The claim was that HireRight did not use “reasonable procedures to assure maximum possible accuracy of consumer report information” and so violated the FCRA.  However, the claim does not say what a reasonable procedure in the criminal background reporting context is or should be.  This highlights something:  while criminal background reports are subject to the FCRA, there haven’t been enough decided cases and hasn’t been enough time to get an idea of what “reasonable procedures” are in this area.

For example, and as the NYT suggests, some companies have databases in which they store criminal record information that was at one point obtained from a court house or similar public depository.  A company can use such a database to create a report much more quickly that it could if it had to go to various courthouses each time it created a report.  However, there may be a reduction in accuracy insofar as criminal records have been added or changed in the courthouses but not on the database.  This begs questions like:  would job-hunters rather get a fast answer to a criminal background check, even at an increased risk of inaccuracy?  If so, how much of an “increase” does there need to be in the risk?  Moreover, are there reasonable procedures for using and updating databases, assuming that doing so is permissible – i.e., would a database compiled three years ago be too old, but one year ago be reasonable?

We don’t have answers to these questions yet.  The FCRA’s application to criminal reports remains the most quickly-developing area of this law. 

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FCRA Now Mandates Credit Score Disclosures

August 24, 2012 Leave a comment

This week we celebrated the one-month anniversary of a relatively new FCRA provision that requires creditors that use credit scores to provide those scores to consumers in certain circumstances.  (Well, maybe you celebrated it; I forgot until now).  I thought I’d use the occasion to provide a quick overview of how the FCRA’s free disclosure provisions have developed over time.  Our story goes like this:

In 2003, Congress passed a law called the FACTA, which amended the FCRA in a number of different ways.  Among other things, it required the three main credit bureaus (Experian, Equifax, and Trans Union) to provide one free credit report to each consumer each year, and to create a website – – that consumers could use to get these free reports.  This requirement, along with a number of old and new rules about when and how much the bureaus can charge for credit reports (e.g., if you want more than one report a year) can be found at 15 U.S.C. Sec. 1681j.

Under this FACTA provision, consumers now had the right to receive a free copy of their credit report.  But they didn’t have any free way to obtain their credit score.  Until last month, that is.

In2010, Congress passed the Dodd-Frank Act, which made more changes to consumer financial regulations than you can shake a stick at.  Just one of them concerns us here.  Congress amended the FCRA by changing 15 U.S.C. Sec. 1681m.  The provisions in Section 1681m had for some time required anyone who used a credit report to tell consumers if their credit report had been negative in some way.  For example, if a bank offered you a loan, but did so using a higher interest rate than it might have otherwise, it had to tell you that under Section 1681m.

In 2010, Congress changed Section 1681m to say that any creditor who is required to give consumers notice that their credit report is negative in some way must also give those consumers the credit score that the creditor used, along with some context.  Using our example above, if a bank offers you a loan but at a less-than-perfect interest rate, it now must:  a) tell you so; b) give you a copy of the credit score that it used; and c) give you the range of possible scores.  As avid readers will remember, there are different credit scores with different ranges:  the FICO scale is 300-850, but the Experian scale is 330-830, and the VantageScore scale is 501-990.

These changes to Section 1681m went into effect last month – on July 21, 2012 – so consumers will start seeing their credit scores on letters after they apply for credit.  Note that the FCRA does not yet provide consumers will an easy way to get their credit report and credit score for free.  You can get a free credit report once a year per Section 1681j; and you can now get a free credit score (usually) if you apply for credit per Section 1681m; but there’s no one-stop shop to get both for free.  Lots of places will sell you both, and they are subject to Section 1681j as well.

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Fox News on the FCRA; and a word about permissible purpose

August 17, 2012 Leave a comment

Fox News created a short consumer’s guide to the FCRA, which you can read here.  It does a nice job of giving the reader an overview of what the FCRA does and how it does it, and I recommend it for that reason.

I would caution readers against taking Point #2 of the guide – “Only authorized users can see what’s in your credit report” – too literally.  This part of the article implies that the law somehow prevents people from seeing your credit report.  That’s not how it works.

Neither the FCRA nor the criminal law can stop someone from seeing what’s in your credit report.  Rather, the FCRA penalizes the companies that create credit reports if they allow unauthorized users to see your report, and the criminal law punishes unauthorized users who gain access to your report.  The penalties under both laws are indeed fairly stiff, so the credit reporting agencies have a good incentive to good your report private, and unauthorized users have a good incentive to stay out of your private affairs.

However, sometimes a mistake gets made, or someone slips through the cracks, and an unauthorized user does get access to someone’s credit report.  This shouldn’t be too surprising:  not too long ago, someone stalled on a jet ski in the water near New York City and had to swim to shore; he ended up swimming to JFK airport, where he unintentionally breached its $100 million anti-terrorist security system.  If that can happen, so can errors in the credit reporting security system.  I’m familiar with one case in which a mortgage broker had established access to credit reports, so that he could obtain reports about people who wanted to obtain mortgages through him.  One of the broker’s children allegedly logged onto the system without telling anyone and used it to pull credit reports of people that the child knew.  And I’ve read about cases in which a private eye, a car dealer, or another person with a business reason to obtain credit reports uses that access impermissibly.

In these situations, the FCRA is usually NOT going to penalize the credit reporting agency.  See, e.g., Boothe v. TRW, 557 F. Supp. 66 (S.D.N.Y. 1982); Wilson v. Sessoms, No. 96-1031, 1998 U.S. Dist. LEXIS 8154 (M.D.N.C. Mar. 16, 1998); Short v. Allstate Credit Bureau, 370 F. Supp. 2d 1173 (M.D. Ala. 2005), all of which held that a credit reporting agency was not liable when a previously trustworthy business used its relationship with the agency to obtain someone’s credit report without permission.  From the agency’s perspective, a mortgage broker, car dealer, or private eye asked for a credit report; the agency had no reason to suspect that there was anything impermissible about that request.  The FCRA or some other law may give the person whose report was accessed a right to sue the broker, dealer, or private eye.  But they may not be wealthy enough to make suing them worthwhile.



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After a long winter’s nap …

August 17, 2012 Leave a comment

Those of you who read this blog will have noticed that it’s been asleep for a few months now.  Like most bloggers who stop posting, I got distracted by events in the rest of my life:  a family member’s surgery; a massive insurance lawsuit that involved 1,100 damaged vehicles; a new baby on the way; and a new house to accommodate the new baby.  But things have calmed down a bit, and I’m going to try and revive the blog.  Look for new posts in the coming weeks.

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