Kevin Coy is a Partner in the Washington DC office of Arnall Golden Gregory LLP. Kevin advises background screening companies and other clients on a wide range of privacy and consumer regulatory issues, including Fair Credit Reporting Act, Gramm Leach Bliley Act, Drivers' Privacy Protection Act, and Dodd Frank Act compliance issues, as well as data breach matters. Kevin also represents clients with matters before the Federal Trade Commission, the Consumer Financial Protection Bureau, and other consumer protection agencies.

Kevin can be contacted at Kevin.Coy@agg.com or 202-677-4034.

THE WASHINGTON REPORT - April 2013

Spring has finally arrived in Washington and the Capital is full of activity, although it remains to be seen what ultimately will be accomplished by the Congress, the Administration or the FTC and other agencies on various background check issues.

On the Hill

As has been the case all year, the background checks that have received the most attention on the Hill are background checks in the context of proposed gun control legislation. Background checks in the immigration reform context, however, are likely to receive increased attention in the weeks and months ahead as Congress attempts to reform the immigration system.

E-Verify is expected to play a significant role in the immigration reform debate, as various immigration proposals are expected to call for expanded use of E-Verify as a means of ensuring that those seeking jobs in the United States are legally eligible for employment. Multiple E-Verify bills already have been introduced, and the Senate proposal of the so-called “Gang of 8”, which is expected to be officially introduced before this month’s edition of the Washington Report goes to press, is reported to call for “universal” use of E-Verify.

The President’s Fiscal Year 2014 budget proposal, released April 10, also calls for enhancement of E-Verify. The President requests $114 million to support, expand, and enhance the E-Verify system to build additional system capacity, enhance fraud-prevention and detection capabilities, and improve individuals’ ability to ensure their employment eligibility records are accurate.

At the FTC

The FTC continues to warn potential background screeners that the FCRA applies to websites and mobile applications as well as to more traditional consumer reporting distribution channels. On April 3rd, the FTC sent letters to the operators of six websites that sell tenant history information advising them of their obligations if they are consumer reporting agencies or nationwide specialty consumer reporting agencies subject to the FCRA.

The companies (and websites) that were the subject of the FTC letters included: The BlueChip Group LLC (www.donotrentto.com); M & R Rental Properties (www.badtenantlistings.com); The Landlord Protection Agency (www.thelpa.com), National Tenant Network (www.ntnonline.com); 123 Rent Inc. (www.therentersblacklist.com); and Tenancy Bureau Inc. (www.tenancybureau.us).

The FTC Staff was careful to say in the letters that the FTC had not evaluated the practices of the websites identified to evaluate them for FCRA compliance. The message of the letters, however, was clear: companies selling tenant history information should evaluate their FCRA status and make any necessary changes to FCRA practices to ensure compliance. The FTC took a similar approach with employment background screening companies last year. In February 2012, the FTC sent warning letters to several companies offering what may have been employment screening reports and then, in January 2013, the FTC announced a settlement with Filiquarian Publishing and related persons for selling employment background checks through a mobile application without complying with FCRA requirements. The case was the first such FTC action regarding a mobile application.

The FTC also continues to use its FCRA and other enforcement authorities to pursue information security safeguards and settlements. The FTC released its FY 2013-2014 Performance Plan in early April, in which the Commission indicated that it would “[u]se law enforcement to promote better data security practices through enforcement of the Gramm-Leach-Bliley Act, the Fair Credit Reporting Act, and Section 5 of the FTC Act.” While this was the only reference to the FCRA in the document, it would be prudent to assume that the FTC will not confine its FCRA enforcement efforts to security (regardless of how broadly one might define that term), given that the performance plan was released shortly after the tenant screening warning letters discussed above.

The FTC also plans to diversify its enforcement efforts by monitoring the marketplace to identify illegal practices that may not be fully captured through complaints to the FTC. The FTC target for law enforcement actions based on consumer complaints is 70% in FY 2013 and FY 2014. In FY 2012, in contrast, 90% of the law enforcement actions brought by the FTC originated from consumer complaints to the FTC. This month’s tenant screening warning letters may or may not be an example of this planned reduction in reliance on consumer complaints since it is unknown how these particular tenant screening companies can to the attention of the FTC.

At the CFPB

t the end of March, the CFPB released an expanded data set regarding complaints that the CFPB had received from consumers about certain financial services companies and how those companies responded to the complaints. The information in the data set does not identify particular consumers, but does identify companies by name, category and other metrics. Complaints about mortgages, credit cards, student loans and other consumer lending offerings are available in the expanded data set. The CFPB has encouraged various stakeholders and the public at large to analyze the data and let the CFPB know if they find “something interesting” in the data.

As yet, complaints about consumer reporting agencies have not been added to the dataset (although the CFPB already is collecting complaints about credit reporting). It nevertheless may be worth taking a moment to check out http://www.consumerfinance.gov/complaintdatabase/ for a glimpse of what the future may hold for some, if not all, consumer reporting agencies, as the CFPB continues to expand its complaint processes and the publicly available dataset of consumer complaint information.

Disclaimer: The Washington Report provides a general summary of recent legal and legislative developments and is for informational purposes only. It is not intended to be, and should not be relied upon as legal advice. For more information, please contact Kevin Coy at 202-677-4034.