Under proposed order, companies will pay $5.8 million penalty, implement FCRA monitoring program

Washington D.C. / CRWE PRESS RELEASE / September 11, 2023 -  The Federal Trade Commission will require background report providers TruthFinder and Instant Checkmate to pay $5.8 million to settle charges that they deceived consumers about whether consumers had criminal records and that the companies violated the Fair Credit Reporting Act (FCRA) by operating as consumer reporting agencies while, among other things, failing to ensure the maximum possible accuracy of their consumer reports.

“Companies that compile personal information and sell background reports are on notice: Don’t make false claims about the contents of your reports,” said Samuel Levine, Director of the Bureau of Consumer Protection. “And, if you market your reports to be used to screen tenants or employees, you are a consumer reporting agency and you must follow the requirements of the FCRA.”

California-based Instant Checkmate and TruthFinder market people-search services, allowing users to search unlimited background reports on individuals, and charge monthly subscription fees to view the full reports. In 2014, Instant Checkmate agreed to settle FTC charges that the company previously violated the FCRA by failing to take reasonable steps to make sure that its background reports were accurate and that its users had a permissible reason to have them.

In a complaint, the FTC says Instant Checkmate and TruthFinder made millions from their monthly subscriptions using push notifications and marketing emails that claimed that the subject of a background report had a criminal or arrest record, when the record was merely a traffic ticket. All the while, the companies touted the accuracy of their reports in online ads and other promotional materials, claiming that their reports contain “the MOST ACCURATE information available to the public.” The FTC says, however, that all the information used in their background reports is obtained from third parties that expressly disclaim that the information is accurate and that Truth Finder and Instant Checkmate take no steps to verify the accuracy of the information.

The companies also deceived customers by providing “Remove” and “Flag as Inaccurate” buttons that did not work as advertised, according to the complaint. The “Remove” button removed the disputed information only from the report as displayed to that customer; however, the same item of information remained visible to other customers who searched for the same person. In addition, the FTC also says that, when a customer flagged an item in the background report as inaccurate, the companies never took any steps to investigate items flagged by consumers as inaccurate, to modify the reports, or to flag to other customers that the information had been disputed.

Despite disclaimers on their websites, according to the complaint, TruthFinder and Instant Checkmate have operated as consumer reporting agencies (CRAs) because they have assembled and evaluated information on consumers into background reports and have marketed and sold those reports for employment and tenant screening purposes. And, as CRAs, they were required to comply with the FCRA. For example, the complaint charges that the companies used search engine advertising keywords that relate to employment and tenant screening, such as “best background check for landlords” and “pre-employment screening.” The FTC noted that Instant Checkmate was already under an FTC order for engaging in similar conduct, which implicated it as a CRA, and therefore was aware that it was required to comply with the FCRA.

The FTC says that, in addition to failing to ensure the accuracy of their reports, the companies violated the FCRA by providing background reports to people who did not have a permissible purpose to obtain them and failing to implement reasonable procedures to limit who could obtain their background reports. The FTC also says the companies failed to investigate and respond to consumer complaints about inaccuracies in their reports, as required by the FCRA.

TruthFinder and Instant Checkmate tried to increase the number of positive user reviews, and decrease the prominence of negative user reviews, by offering customers one free premium background report in exchange for posting a review of their products on the review site HighYa, which warns that such practices violate the site’s terms and conditions, according to the FTC. TruthFinder and Instant Checkmate, however, failed to advise customers to disclose that they were being compensated for their review.

Under the proposed order, which must be approved by a federal judge before it can go into effect, TruthFinder and Instant Checkmate and their affiliated companies will be required to pay a $5.8 million penalty. Other provisions of the order:

• require the companies 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;
• permanently prohibit them from failing to comply with the FCRA when they are operating as a CRAs;
• permanently prohibit them from misrepresenting the accuracy of their reports or making similar misrepresentations as outlined in the complaint; and
• require them to 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.

The Commission voted 3-0 to refer the complaint and stipulated order to the Department of Justice for filing, as is required by statute. The Department of Justice returned the matter to the FTC for filing. The FTC filed the complaint and proposed stipulated order in the U.S. District Court for the Southern District of California.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the named defendant is violating or is about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated orders have the force of law when approved and signed by the District Court judge.

The lead staff attorneys on this matter are Katherine McCarron and Robin Wetherill from the FTC’s Bureau of Consumer Protection.

The Federal Trade Commission works to promote competition and protect and educate consumers. Learn more about consumer topics at consumer.ftc.gov, or report fraud, scams, and bad business practices at ReportFraud.ftc.gov. Follow the FTC on social media, read consumer alerts and the business blog, and sign up to get the latest FTC news and alerts.

Contact Information

Media Contact

Juliana Gruenwald Henderson 
Office of Public Affairs
?202-326-2924

Source: Federal Trade Commission