The Federal Trade Commission (“FTC”) on September 11, 2023, settled a claim against a group of affiliated entities operating a background reporting business, Instant Checkmate, LLC, TruthFinder, LLC, The Control Group Media Company, LLC, Intelicare Direct, LLC, and PubRec LLC (“background report companies” or “companies”) for alleged misrepresentations that deceived consumers about whether they had criminal records and for operating as a consumer reporting agency without following the requirements of the Fair Credit Reporting Act (“FCRA”). The companies were ordered to pay a $5.8 million civil penalty, which the companies are jointly responsible for.

The FTC found that the background report companies violated the FTC Act’s prohibition against unfair and deceptive acts by sending notifications and emails to users of their websites that indicated that the subject of a background report had a criminal or arrest record, when the individual actually had a traffic ticket. The companies then charged consumers monthly subscriptions fees to view the full background reports. The companies also deceived consumers into thinking they could dispute or remove inaccurate information, by providing “remove” and “flag” buttons that only removed the information from that consumer’s view, but not from the actual report.

The FTC found that the companies violated the FCRA by operating a consumer reporting agency without taking any steps to ensure the accuracy of the reports they provided and by providing reports to people who did not have a permissible purpose to view the reports.

The final order requires the companies to, among other things:

  • Establish and implement a comprehensive monitoring system to assess and determine to what extent the company is operating a consumer reporting agency
  • Maintain reasonable procedures designed to limit the furnishing of consumer reports to persons with permissible purposes to receive them and that appropriate FCRA notices are provided to consumers
  • Maintain procedures to assure the maximum possible accuracy of the information concerning consumers about whom reports relate
  • Provide accurate representations regarding the effect of removing or flagging inaccurate consumer report information, and provide accurate representations about whether information in a report relates to a criminal record

This is the second FTC settlement against Instant Checkmate, which settled a claim in 2014 for alleged previous violations of the FCRA. Again, in that case, Instant Checkmate failed to take reasonable steps to make sure that its background reports were accurate and that its users had a permissible purpose to have them.