Two of the largest employment background-check companies must pay $10.5 million to consumers for selling inaccurate information about job applicants to employers, the Consumer Financial Protection Bureau announced Thursday. General Information Services and Backgroundchecks.com will also have to pay a $2.5 million civil penalty for failing to verify the accuracy of the reports they sold.
“General Information Services and its affiliate failed to take basic steps to provide accurate background screening reports to employers about job applicants,” said CFPB Director Richard Cordray in a news release about the enforcement action. “Today, we are holding two of the largest companies in this market accountable for cleaning up the quality of their reports.”
The companies sell more than 10 million reports each year to potential employers. The reports contain things like criminal histories and public records on consumers. The CFPB estimates affected consumers will receive about $1,000 each from the fines.
The CFPB found that General Information Services and Backgroundchecks.com violated federal laws by failing to match public records to the correct consumers. It also included information in its reports that are not legally allowed in consumer reports, including civil judgment information older than seven years. The Bureau said inaccuracy was rampant: 70% of criminal history disputes filed between 2010 and 2014 resulted in a change or correction to consumers’ reports from General Information Services. Errors included misdemeanor crimes reported as felonies, criminal record confusion among consumers with similar names and inclusion of dismissed or expunged criminal charges. Neither company had a written policy for researching consumers with similar names and General Information Services did not require employers to submit job applicants’ middle names.
Employers use these reports in their hiring decisions, meaning millions of Americans may have missed out on jobs because their background checks had inaccurate information, the CFPB said.
General Information Services and Backgroundchecks.com posted a statement Thursday, noting that they believe the companies complied with Fair Credit Reporting Act regulations.
“Regardless, the companies remain committed to the highest achievable levels of accuracy in their reports and acknowledge that every background screening agency must engage in continuous improvement,” the statement reads. “Therefore, the companies take the Bureau’s allegations very seriously and have agreed to the terms that the order imposes.”
What to Know About Employers & Credit Reports
The role of consumer reports in the hiring process has long been controversial, not only because of the detrimental effect inaccurate information can have on an applicant, but also because consumer advocates question how some of the data correlate to job performance. For example, Sen. Elizabeth Warren recently co-authored an op/ed with Rep. Steve Cohen calling for an end to employer credit checks. The Consumer Data Industry Association, however, has asserted that there is plenty of evidence to support a correlation between employee money troubles and workplace fraud, and employers need that data to make hiring decisions.
Despite the debate, many employers ask applicants for permission to review their credit reports or consumer reports. It’s a good idea to request your free annual credit reports when you’re looking for a job, so you can dispute inaccuracies or proactively address any negative information a potential employer may see when reviewing your reports. You can get a free summary of your credit reports every 30 days on Credit.com.
More on Credit Reports & Credit Scores:
- How Do I Dispute an Error on My Credit Report?
- What’s a Bad Credit Score?
- How Credit Impacts Your Day-to-Day Life