Last week, the Federal Trade Commission entered into a consent order with two companies alleged to have operated as consumer reporting agencies, by providing criminal record reports through mobile applications, without complying with the Fair Credit Reporting Act (FCRA).  The consent order represents the FTC’s first FCRA case involving mobile applications. 

According to the FTC’s complaint, Filiquarian Publishing LLC, Choice Level LLC, and their CEO, Joshua Linsk, designed and marketed mobile applications that enabled users to search criminal records databases.  The companies marketed the applications for employment purposes as a tool to use in screening potential employees.  Indeed, one advertisement for the applications offered “Are you hiring somebody and wanting to quickly find out if they have a record?  Then Texas Criminal Record Search is the perfect application for you.”  The FTC alleged that the companies were operating as consumer reporting agencies in providing the criminal records reports for employment purposes and that the companies failed to comply with the FCRA.  The applications included disclaimers that the applications were not compliant with the FCRA and not to be used for FCRA permissible purposes; however, the FTC viewed these disclaimers as insufficient to insulate the companies from liability since the companies actively marketed the applications for employment purposes. 

The consent order, among other provisions, prohibits the companies from providing consumer reports to individuals if the companies do not have a reason to believe the individuals have a permissible purpose under the FCRA.  The order also prohibits the companies from failing to maintain reasonable procedures to assure maximum possible accuracy with respect to the consumer reports provided by the companies to consumers.  The companies are required to submit periodic reports to the FTC demonstrating compliance with the consent order.