FCRA Ruled Constitutional - Federal District Court Rules Against General Information Services and Sides with the United States Government and Class-Action Plaintiffs

ATHENS, GA, November 09, 2012 (Press-News.org) Federal District Court Judge Petrese B. Tucker ruled today against General Information Services, Inc., a major background screening provider, in its motion that the Fair Credit Reporting Act (FCRA) is unconstitutional. In what is predicted to be one of the largest class-action lawsuits brought against a consumer reporting agency, the U.S. Department of Justice successfully argued against GiS's defense. (The court's ruling can be found here.) The court's ruling now places GiS in the untenable position of either appealing or attempting to defend its illegal reporting practices as they face two similar class-action cases in federal court.

Consumer reporting agencies (CRAs), such as background screening companies, play a vital role in hiring, helping companies make well-informed hiring decisions, particularly with sensitive positions. However, with such information readily available for CRAs to disseminate, there are obvious concerns for an individual's right to privacy. This is why nearly forty years ago, the Fair Credit Reporting Act was enacted. The FCRA regulates the collection, maintenance, and disclosure of consumer reports by CRAs, including public record information (15 U.S.C. Sections 1681 - 1681x). Section 1681c of the FCRA provides requirements relating to information contained in consumer reports. When a CRA, such as GiS, produces a copy of a consumer's report to the consumer or a third-party (such as employers), the CRA is required to exclude, inter alia, "adverse items of information, other than records of convictions of crimes which antedates the report by more than seven years" (15 U.S.C. Section 1681c(a)(5)). The statute also demands that consumer reporting agencies exclude records of arrest that antedate the report by more than seven years (15 U.S.C. Section 1681c(a)(2)).

Around early 2010, Shamara King applied for a job with the United States Postal Service, which ordered a background check from GiS during the application process. The report that GIS returned contained ten nolle prossed (dismissed) charges from July of 2000: these arrest records were nearly a decade old. Ms. King's consumer report also disclosed other inaccurate or misleading information. On March 4, 2010, GiS mailed Ms. King a copy of the consumer report that had been sent to the Postal Service earlier. After being turned down for the Postal Service job due to this report, Ms. King brought a class-action suit against GiS for its alleged failure to comply with section 1681c of the FCRA. She alleged that GiS maintained a policy and practice of willfully reporting outdated adverse public information, including records of arrest, that is required to be excluded from the consumer reports it sells.

Accepting all of the facts alleged in the Complaint to be true, GiS's defense challenged the constitutionality of section 1681c of the FCRA. The first issue the Court addresses in its denial of GiS's motion was the nature of the speech between GiS and the United States Postal Service, the employer. The court wrote, "Applying these principles to the case at hand, this court finds that the consumer report information disseminated by GIS concerns purely private matters. The very fact that GIS compiles consumer reporting information for the purpose of making a profit and its business customers purchase such reports in order to make business decisions supports the proposition that the dissemination of this information is of sole interest to the speaker (GIS) and its audience (business customers). Moreover, like the consumer reports in Dun & Bradstreet, GIS' consumer reports are made available to the paying subscriber only. As such, the private nature of these consumer reports does not significantly contribute to public dialogue and, accordingly, this Court finds that such information warrants a reduced constitutional protection."

The Court ruled that the FCRA was enacted to provide businesses with the most accurate and relevant information while simultaneously protecting the privacy rights of consumers. The stated purpose of the FCRA is "to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce . . . in a manner which is fair and equitable to the consumer."

GiS is not alone, as background screening providers have been under attack for reporting inaccurate or outdated information, resulting in fines by the Federal Trade Commission and similar class-action lawsuits. Earlier this year, HireRight agreed to pay the FTC $2.6 million (read more) for inaccurate reporting. When faced with the decision to go to trial or settle in another class-action case, HireRight decided to settle on July 1, 2011 (Smith v. HireRight Solutions, Inc.). HireRight placed over $28 million in the settlement fund for damages to consumers and paid another $15.2 million in attorney fees to the plaintiffs, for a total of $43.6 million, which does not include their own legal defense cost. HireRight identified 665,318 consumers impacted by its settlement, which likely cost $3.3 million in mailing cost notifications alone, much less the damage to its reputation. These class-action settlements being entered into by industry giants reveals the stark reality facing background screening providers and users of consumer reports who violate FCRA provisions.

Just when you think it can't get worse for GiS, another class-action case (Hutchinson v. General Information Services) was filed in July. Hutchinson was fired from GameStop after receiving a background report from GiS, which claimed he had been convicted in 1996 for cocaine possession. As it turns out, GiS used only a name match and Hutchinson was not the felon sent to prison for ten years. During the time the real person was in prison, Hutchinson was still in high school. GameStop fired Hutchinson, though he denied the conviction and disputed his background report with GiS. Meanwhile, Hutchinson applied with Wal-Mart, another client of GiS. GiS appears to not have informed Wal-Mart that Hutchinson had an active dispute. Wal-Mart refused to hire Hutchinson based on a new report generated by GiS revealing the same inaccurate conviction history. GiS issued a new report two weeks later admitting its serious error: Hutchinson had no criminal record.

Employers Seeking Solution. Steven C. Millwee, CEO of SecurTest, Inc., is a leading expert witness on background screening and FCRA matters. His company was also named one of the top background screening companies by HROToday, largely due to his revolution patented iReviewNow compliance system, outstanding customer service ratings, and its 300% explosive growth in 2011. Millwee, the past president of ASIS International, used his knowledge gained through his extensive experience testifying as an expert witness as the genesis for solving the problems that have been plaguing background and consumer reports. His patent was issued on July 12, 2011. The power of his patent solves, among other issues:

- Contemporaneous reporting to the consumer before adverse decisions or actions can be taken.
- Allowing consumers the ability to see their consumer report, whether it reports any adverse information, as everyone has the right to see their report in real-time.
- Allowing consumers to instantly dispute errors, which is now required under FCRA and the new EEOC rules.
- Allowing consumers to explain their past, another mandate of the FCRA, since consumer reports provide little context, and no input, acceptance of responsibility, or background information that only the consumer can disclose.
- Allowing consumers to present themselves in the most favorable light to users of the report, which is one of the most important mandates of the new EEOC regulations and a longstanding requirement of the FCRA. The consumer can detail his rehabilitation or self-improvement, attach documentation proving his claims, and give employers and users a 360 degree view of their applicants and employees.

Millwee's patent eliminates FCRA, EEOC, and similar state claims, as consumers using iReviewNow consent to use the system in lieu of waiting on what the federal courts are calling antiquated methods. Consumers receive fair consideration, which eliminates claims of damages, and users of iReviewNow have independent evidence of its compliance with the strict FCRA and EEOC rules. It will be interesting if Millwee licenses his one-of-a-kind patent to background screening providers and CRAs, as no other CRA can violate the protections afforded in the patent claims, including the ability to conduct consumer disputes over email and other web-based interfaces.

About SecurTest and iReviewNow. SecurTest was recently named one of the top background screening companies by HRO Today and is the fastest-growing company of its kind, with growth of 300 percent in 2011. Having acquired new government and private sector contracts, SecurTest's revenues are expected to quadruple in 2012. The company's growth has been fuelled by the 2011 introduction of its patented iReviewNow System, which allows consumers the opportunity to review their background reports in real-time, and dispute any inaccuracies before adverse hiring actions or business decisions are made. SecurTest is relied upon by various branches of the U.S. government to perform background investigations, including the military and the Department of Homeland Security. SecurTest ensures that reports are accurate using its proprietary iReviewNow System. For more information, call (800) 445-8001, email news@ireviewnow.com or go to www.ireviewnow.com or www.securtest.com.