The Federal Trade Commission reached a settlement last week with a mobile app company, its data provider, and their CEO in its first Fair Credit Reporting Act (“FCRA”) enforcement action involving mobile applications. The mobile application company designed mobile apps that enabled users to search criminal records databases and advertised the apps as tools for conducting criminal background checks on potential employees.

Under the FCRA, individuals or organizations that use outside entities, including 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. Although the companies included disclaimers in their terms and conditions stating that they were not FCRA compliant, that their products were not to be considered screening products for employment, insurance, loans, and credit screening, and that anyone who used their reports for such purposes assumed sole responsibility for FCRA compliance, the Commission viewed these disclaimers as insufficient to avoid liability under the FCRA because the mobile app company advertised that the reports could be used to conduct searches on potential employees, and therefore, the companies could expect them to be used for employment purposes.