FTC puts background check sites on notice


WASHINGTON — Federal regulators on Tuesday warned several companies that the quick, easy background checks they are providing online might violate the Fair Credit Reporting Act.

The Federal Trade Commission sent warning letters to 10 businesses, including 4Nannies.com, USA People Search and ConsumerBase, after FTC staff posed as employers and creditors looking for information that could be used to deny a person a job, an apartment or even insurance.

The law requires that companies providing information to potential employers or landlords — as well as insurers and creditors — double check the accuracy of their records and notify a person if a background check has been done. And in some cases, the businesses need to make sure the person asking for the information has a legitimate purpose for receiving it.

If the business doesn’t take these additional steps, it must make clear that its background checks may include errors and should be used for marketing or entertainment purposes only.

Laura Berger, a staff attorney with the FTC Bureau of Consumer Protection, said the FTC’s primary concern is that these companies are aggregating information without a person’s knowledge and selling personal records that could be out-of-date or inaccurate.

“They (consumers) don’t have the ability to review, challenge and correct the information,” Berger said.

ConsumerBase, 4Nannies.com and USA People Search did not immediately return phone calls requesting comment.

The 10 companies were identified as part of the FTC’s “test-shopping operation,” in which staff queried 45 “data brokers,” that compile records and sell them. Berger said most of the queries were made by phone.

In the case of ConsumerBase, the FTC warned it appeared to be selling “prescreened lists,” or lists of consumers who meet a certain financial criteria. That list is then sold to lenders who make pre-approved credit offers. In its letter, the FTC warned ConsumerBase that its sale of such lists could violate the law.

“We want to make you aware of the requirements of this law so that you can ensure that your practices comply with it, insofar as you engage in such sales,” the FTC wrote.

Berger declined to offer more specifics on each of the 10 cases, other than to say that most of the queries by FTC staff were conducted by phone and that in each case there was some indication that the company might not be complying with the law. Berger said it could be a matter of improving staff training or clarifying company policies.

If the FTC finds that the companies do not change their business practices, or if complaints are filed, the FTC could launch a formal investigation or eventually levy fines against the companies.