Background checks are becoming an increasingly ubiquitous part of modern life.
You want a job? We’ll need a background check. . .
You want this apartment? We’ll need a background check. . .
If you’d like this car loan, we’ll need a background check. . .
The Background Check Industry
The rise of the internet and need for government agencies to bolster their balance sheets have given rise to a multibillion dollar, for-profit background check industry that gleans data from public records. And it seems that the industry will only continue to grow.
However, as much as we’d like to believe that background checks are accurate and up-to-date, government records can often be unreliable and background check companies can often fail to adequately “check” their work, so to speak. Increasingly, companies that run for-profit background checks have come up against class action lawsuits, many of which have been settled for millions of dollars, alleging violations of the Fair Credit Reporting Act (FCRA).
Background checks must follow “reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates” and the process must follow certain disclosures and authorizations on the part of the person being checked. Oftentimes, however, these things do not happen.
Background Checks Gone Wrong
Take, for instance, one Sung Gon Kang whose visit to a Honda dealership led to an embarrassing “credit denied” after a background check revealed him to be on the Treasury Department Office of Foreign Assets Control list (“OFAC” list), which prohibits US companies from doing business with certain individuals or entities known as “Specially Designated Nationals” (SDN). This was news to Sung Gon Kang. He wasn’t trafficking drugs or plotting terrorist acts. So what happened? Well, when the background check company, Credit Bureau Connection, Inc., ran a search for Sung Gon Kang, they found a similarly named Sung Nam Kang, a North Korean SDN, which they seemingly confused for our hero and failed to cross check with other readily available information, like date of birth. The case eventually settled for $2.7 million.
Credit Bureau Connection is not the only background check company to get things confused. In May, a class action suit was brought against the background check firm ADP Screening and Selection Services, Inc., when their background check got a job candidate denied a position. Their report showed that he had a criminal record. Only, he didn’t. Someone with the same name did, and readily available information, like date of birth, was not cross-referenced by the agency.
It’s not only names that get confused. Sometimes it’s the alleged criminal record. In another recent class action case, which is seeking $4 million in damages, a Minnesota man was denied an apartment when the background check run by Inflection Risk Solutions LLC revealed he had committed a felony, and a violent one at that. While the man did have a criminal record, he had only committed a misdemeanor, which was never classified as “violent” by the courts.
Transparency is Important Too
To be fair, sometimes it’s not the background check companies that run afoul of the law. Just this summer, O’Reilly Auto Enterprises agreed to a $950,000 settlement to resolve a class action case in which it was alleged to have violated FCRA when it was alleged to have failed to obtain proper disclosures and authorization before running background checks on job applicants. O’Reilly is alleged to have violated the “standalone” disclosure requirement by streamlining their employment documents. And it was further alleged that they violated the “clear and conspicuous disclosure” requirement by combining both federal and state disclosures into one.
Amazon and its background check provider are facing a class action for allegedly violating Megan’s Law, which does not allow employers to reject applicants whose names appear on their list, and for violating California’s seven-year bar for criminal background checks.
Employers have also settled class action suits that alleged they failed to provide the required pre-adverse notice and a copy of the background check five days before rejecting an applicant from employment.
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