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FTC EXPANDS FCRA COVERAGE TO MOBILE INDUSTRY

The Federal Trade Commission (“FTC”) recently extended the reach of the Fair Credit Reporting Act (“FCRA”) to the mobile industry by means of a consent order, settling its complaint that alleged Respondents Filiquarian Publishing LLC and Choice Level LLC (as well as the sole owner and corporate officer of the Respondents in his individual capacity) furnished employment screening data in violation of the FCRA. This alert discusses the ramifications of the consent order on the breadth and enforcement of the FCRA.

Facts

By way of background, Filiquarian operated a series of mobile applications (“apps”) which it distributed and sold through two online stores, iTunes and Google Android store, now GooglePlay. Filiquarian represented that consumers could use the apps to conduct a “quick criminal background check for convictions,” providing access to hundreds of thousands of criminal records (including those of prospective employees) made available by Choice Level LLC. In fact, after downloading the app, users could conduct an unlimited number of searches for criminal record reports within a specific geographic location (such as a state or county). The FTC determined that Respondents violated the FCRA by the manner in which they made these apps available to consumers (such as employers).

Complaint and Consent

The FCRA covers credit reporting agencies that perform background checks on behalf of consumers. The FTC charged that, given the nature of the Respondents’ operations, they qualified for coverage under the FCRA but had not complied with several of its provisions. Specifically, they had (i) “furnished consumer reports to third parties without procedures to inquire into the purpose for which the user is buying the report”; (ii) “failed to require that prospective users of their reports identify themselves, certify the purposes for which the information is sought, and certify that the information will be used for no other purpose”; (iii) “maintained no procedures to assure maximum possible accuracy of information in the reports it provided”; and (iv) “failed to provide such notices” that the FCRA requires for all users of consumer reports.

Filiquarian and Choice Level had included a disclaimer in their “terms and conditions” stating that their respective products should not be considered screening devices for purposes of insurance, employment, loans, and credit applications, inter alia. The disclaimer also stated that Respondents did not comply with the FCRA and, in turn, any person using screening information made available by the app “assumes sole responsibility for compliance with the Fair Credit Reporting Act and all/any other applicable laws.” According to the FTC’s press release announcing the settlement, however, the disclaimers were “not enough to avoid liability under the FCRA,” as the company promoted the apps to employers and expected that employers would use them.

As a result, the consent order required that Respondents: (i) maintain reasonable procedures to verify the users of the mobile apps and the purposes behind the apps’ use; (ii) ensure the accuracy of the information contained in the consumer reports; and (iii) provide notice to users of their obligations under the FCRA.

Consequences for FCRA Enforcement

The FTC’s decision to extend the reach of the FCRA is consistent with its prior pronouncements. In a March 2012 report entitled “Protecting Consumer Privacy in an Era of Rapid Change,” the FTC specified that “[e]ven if a company is not compiling or sharing data for the specific purpose of making employment . . . decisions, if the company has reason to believe the data will be used for such purposes, it would be covered by the FCRA.” A month prior, the FTC also warned marketers of mobile apps that if they had reason to believe that the background reports available through their apps were being used for employment purposes, the FCRA would apply.

The consent order also comes on the heels of several other settlements brokered by the FTC. For example, in October 2012, the FTC settled charges against Equifax Information Services LLC and its customer, Direct Lending Source, for a total $1.6 million dollars for the allegedly improper sale and resale of customer lists. In August 2012, HireRight Solutions, an employment background screening company, settled charges to the tune of $2.6 million for allegedly failing to use reasonable procedures to assure the accuracy of the information provided to employers—the second largest civil penalty the FTC ever obtained under the FCRA. And, in June 2012, Spokeo, Inc., a data broker which compiles and sells consumer profile information, settled charges for $800,000 for marketing profiles to companies engaged in human resources, background screening, and recruiting without allegedly protecting consumer information under the FCRA.

Despite this flurry of activity, it should be noted that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 has shifted the responsibility of interpreting and enforcing the FCRA from the FTC to the Consumer Financial Protection Bureau (“CFPB”). Nevertheless, in January 2012, the FTC and the CFBP entered into a Memorandum of Understanding agreeing to cooperatively “share certain responsibilities and authorities to protect the nation’s consumers” and to “seek to exercise their law enforcement authority” without “duplication of efforts” for up to three years. Given the Memorandum of Understanding and the FTC’s recent actions, the FTC may yet play a role in the future of FCRA enforcement.

Takeaway for Employers

The FTC’s consent order bodes consequences for employers who use mobile apps to conduct background checks. The FCRA only covers employers who solicit third-party credit reporting agencies to perform background checks. However, given the FTC’s efforts to broaden the definition of the term “credit reporting agency” through litigation like the ones against Filiquarian, employers must remember that, by retrieving background information on their applicants and employees through any number of software applications, they may qualify as a “user” of a third-party credit reporting agency and, thus, could be subject to the FCRA.

To continue reading, please visit: http://www.jdsupra.com/legalnews/ftc-expands-fcra-coverage-to-mobile-indu-36252/

NEWSPAPER’S LAST EMPLOYEE RETIRES ALMOST TWENTY-FOUR YEARS AFTER THE PAPER CEASED PUBLICATION

LOS ANGELES (KNX 1070) — It’s been more than 23 years since the Los Angeles Herald Examiner ceased publication.

But, unbelievably, the paper technically has one employee left. But not for long.

This Wednesday, Charles — or Chuck — Lutz will leave the building for the last time.

KNX 1070′s Claudia Peschiutta spoke to Lutz about his retirement.

Lutz says, matter-of-fact, “Yes, I am the last Herald Examiner employee.”

He started as a truck driver. And he’s held various jobs over the years.

When the Herald Examiner shut down in 1989, Lutz says he just kept going back to work. “And nobody ever said not to come back.”

He helped close down the operation. And, eventually, he got the title of building supervisor, watching over the Herald Examiner’s former offices at 11th and Broadway downtown Los Angeles. For years, those offices have been used for film and television shoots.

“He’s an old school guy with a lot of modesty,” says Bryan Erwin, with Hollywood Locations, the company that coordinates film shoots there. He says Lutz is a fixture there. “He’s just this modest man in his 60s.”

And, when Lutz – who is 68 — decided he was going to retire this coming week, he didn’t want any fuss.

“Nobody heard about it,” he says, “until they started writing these stories about it. And Bryan opened his big mouth. Otherwise I would have slipped out of here and no one would have known.”

To read the full story, please visit http://losangeles.cbslocal.com/2013/01/06/the-herald-examiners-last-employee-retires-this-week-even-though-paper-ended-in-1989/

DEFENSE SECRETARY GIVES PENTAGON UNTIL JAN. 21 TO COMPLETE BACKGROUND CHECKS ON CHILD CARE WORKERS

Defense Secretary Leon Panetta is giving the Defense Department and the military services until Jan. 21 to review the backgrounds of all employees who have contact with children in department programs and to report back in writing.

Panetta’s memo follows revelations that at least 31 people were suspended from two Army day care centers at Fort Myer, Va., last week after officials scrutinized their backgrounds and found a range of criminal convictions.

The memo also underscores lingering questions about the Army’s handling of background checks for the day care centers.

Army officials declined comment, saying the matter is under investigation. But officials have been unable to say whether background checks were conducted on employees at the two centers, or if they were done poorly or were done but somehow ignored in the screening of personnel as they were hired.

The background checks were triggered by the arrests of two day care workers in September on multiple counts of assault on children at the Fort Myer Child Development Center. Last week, when the 31 workers were suspended — pending a full review of their possible criminal histories — the Army closed the center. The children and the approximately 100 remaining child care employees at Fort Myer were moved to the Cody Child Development Center, also on the base.

Officials this week — including President Barack Obama — expressed concern about the matter, and Panetta was angry that he did not find out about the issue until Tuesday. Officials said Army Secretary John McHugh found out about the arrests and the suspensions last Friday. Obama personally called McHugh late Tuesday night to urge a speedy investigation.

U.S. officials said McHugh is reviewing the matter and could rule on whether anyone should be disciplined or fired as a result.

Panetta’s memo, issued Thursday, says all segments of the department must ensure that background check procedures are being followed and that each document meets Pentagon requirements.

Under the existing process, human resources offices review the background checks. Any negative findings are referred to a child care review board, which then recommends whether the person should be hired.

 

To read more, visit: http://www.foxnews.com/us/2012/12/21/panetta-gives-pentagon-until-jan-21-to-complete-background-checks-child-care/#ixzz2GrHLbMKq