The Federal Trade Commission has fined a pair of companies nearly $6 million for allegedly violating the Fair Credit Reporting Act by operating as consumer reporting agencies and providing information to companies that did not have permissible purposes to obtain that information. For one of the companies, this marks the second time in nine years that it has been the subject of an enforcement action with the FTC.
A copy of the complaint, filed in the District Court for the Southern District of California, against Instant Checkmate and TruthFinder can be accessed by clicking here.
The two companies market themselves as people-search services, allowing customers who pay a monthly fee to search for background reports on individuals. The companies allegedly made millions of dollars from customers, according to the FTC, claiming that their reports contained “the most accurate information available to the public.” The problem with that statement, noted the FTC, is that all of the information was obtained from third parties that expressly disclaimed the information is accurate and that neither company took any steps to verify the accuracy of the information.
While customers could click on buttons that said “Remove” or “Flag as Inaccurate” that customers could click, neither button did anything, according to the FTC. The “Remove” button, for example, only removed that information from the report that was being displayed to that customer; the information was still able to be viewed by every other user of the service.
Along with paying a penalty of $5.8 million, the companies will also have to:
- establish and implement a comprehensive monitoring program to regularly review, assess, and determine the extent to which each of the companies are operating in whole or in part as a CRA and to ensure that they are complying with the requirements of the FCRA;
- be permanently prohibited from failing to comply with the FCRA when they are operating as a CRAs;
- be permanently prohibited from misrepresenting the accuracy of their reports or making similar misrepresentations as outlined in the complaint; and
- mandate that endorsers disclose any material connections and to monitor any endorsers who have a material connection to the company to ensure they are disclosing such connections.
