Can Mobile Apps Violate the Fair Credit Reporting Act?

FTC Warns Six Mobile App Marketers of Possible FCRA Violations

In early February 2012, the Federal Trade Commission (FTC) warned six mobile application marketers that provide background screening apps of possible Fair Credit Reporting Act (FCRA) violations. The warning letters stated, “If you have reason to believe that your background reports are being used for employment or other FCRA purposes, you and your customers who are using your reports for such purposes must comply with the FCRA.”  According to the Federal Trade Commission, some of the apps include criminal record histories, which bear on an individual’s character and general reputation and are precisely the type of information that is typically used in employment and tenant screening.

FCRA

The Fair Credit Reporting Act provides for the accuracy, fairness and privacy of information of files at consumer reporting agencies (CRAs).  A consumer reporting agency is any person who assembles or evaluates and sells consumer information to third parties through interstate commerce.  Some examples of consumer information are credit, employment background checks, insurance claims, apartment rental, check writing histories and medical records.  Only companies with permissible purpose can receive a consumer report for purposes such as lending money, offering credit, monitoring credit by present creditor, employment, insurance and renting.

Under the Fair Credit Reporting Act, operations that assemble or evaluate information to provide to third parties also qualify as consumer reporting agencies.  Mobile apps that supply this information may qualify as consumer reporting agencies. Consumer reporting agencies must take reasonable steps to ensure the user of each report has a ‘permissible purpose’ to use the report; take reasonable steps to ensure the maximum possible accuracy of the information conveyed in its reports; and provide users of its reports with information about their obligations under the Fair Credit Reporting Act.

Employers using consumer reports used for employment purposes must provide the applicant of the reason they were denied employment due to their consumer report.  The consumer reporting agencies must inform the employers of this. Applicants are allowed to receive a free copy of this report, if they are denied employment.

The Federal Trade Commission has not determined whether these companies are violating the Fair Credit Reporting Act. They asked them to review their apps and their policies and procedures to be sure they comply with the Fair Credit Reporting Act.  As new technology comes out such as mobile apps, it will be interesting to see how consumers will be protected.

Credit Expert Witness, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Civil Penalty, Credit Report, Government, Money & Identity

This post was written by John Ulzheimer