Act Now Advisory: FTC Warns That Background Searches via Mobile App May Violate the Fair Credit Reporting Act .

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On January 25, 2012, the Federal Trade Commission ("FTC") sent warning letters to three companies that market, in total, six mobile phone applications ("Apps") that provide users with background check reports. In the warning letters, the FTC states that the Apps may violate the Fair Credit Reporting Act ("FCRA"). According to a press release issued by the FTC on February 7, 2012, the FTC cautioned the Apps' marketers that, if they have reason to believe that the background reports provided will be used for employment screening, housing, credit, or other similar purposes, both the users of the Apps and the marketers of the Apps must comply with the FCRA.

Under the FCRA, individuals or organizations that use outside entities (such as the Apps) to procure certain background information on employees or applicants in connection with their employment (or potential employment) must comply with certain notice, authorization, and other rules. Such outside entities are referred to as Consumer Reporting Agencies ("CRAs") in the text of the FCRA.

Specifically, an entity will be considered a CRA if it assembles or evaluates information on consumers for the purpose of furnishing "consumer reports" to third parties. Consumer reports include information that relates to an individual's character, reputation, or personal characteristics. In addition, consumer reports are used, or expected to be used, for employment or other similar purposes, such as for tenant screening purposes and determining eligibility for credit or insurance.

Please see full advisory below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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