On February 6, 2012, the Federal Trade Commission (FTC) issued warning letters to the marketers of six mobile applications that provide background screening apps that they may be violating the Fair Credit Reporting Act (FCRA.) The FTC said that if the background reports are being used for employment or other FCRA purposes, then the marketers and their clients must comply with the FCRA.

According to the warning letters, the FTC has not made a determination whether the companies indeed are violating the FCRA, but encourages them to review their apps, and their related policies and procedures. The FCRA is designed to protect the privacy of consumer report information and ensure that the information provided by consumer reporting agencies is accurate. Consumer reports are communications that include information about an individual’s character, reputation, or personal characteristics, and are used or expected to be used for purposes such as employment, housing or credit.

Under the FCRA, entities/operations that assemble or evaluate information to provide to third parties qualify as consumer reporting agencies (CRAs.) Mobile apps that supply such information also may qualify as CRAs under the Act. CRAs must take reasonable measures to ensure the user of each report has a ‘permissible purpose’ to use the report, take reasonable steps to ensure the maximum possible accuracy of the information conveyed in the report, and provide users of its reports with information about their obligations under the FCRA. In employment-purpose consumer reports, for example, CRAs must provide employers with information regarding their obligation to give notice to employees and applicants of any adverse action taken on the basis of a consumer report.