The Federal Trade Commission’s recent warnings to three marketers of mobile applications that provide background screening reports that they may be violating the Fair Credit Reporting Act indicates that the FTC has no intention of ceding its FCRA enforcement authority to the Consumer Financial Protection Bureau.

The warnings include a reminder that such authority includes the right to seek injunctive relief and/or monetary penalties of up to $3,500 per FCRA violation (with the FTC’s June 2011 consent agreement with Teletrack, Inc., for civil penalties of $1.8 million cited as an example).

The Dodd-Frank Act gave the CFPB exclusive authority to enforce the FCRA as to certain nonbanks such as payday and student lenders and mortgage originators and servicers regardless of their size; nonbanks considered to be "a larger participant of a market for other consumer financial products or services;" and nonbanks determined to be engaging "in conduct that poses risks to consumers." However, as to all other nonbanks, the FTC retains its pre-Dodd-Frank FCRA enforcement authority.

The three marketers each received identical letters from the FTC stating that at least one of their mobile applications involves background screening reports that include criminal histories. The letters explain that, in providing such histories to a consumer’s current or prospective employer, the marketer is providing "consumer reports" and therefore acting as a "consumer reporting agency" under the FCRA. Accordingly, the letters warn the marketers that if they have reason to believe that the histories are being used for employment or other FCRA purposes (such as tenant screening or credit or insurance eligibility), the marketers and their customers obtaining the histories must comply with the FCRA.

Most significantly, the letters state that the marketers cannot circumvent the FCRA through their use of Web site disclaimers stating that the histories should not be used for employment or other FCRA purposes. Instead, a determination as to whether a marketer had reason to believe its products were used for such purposes would be based on the FTC’s evaluation of many factors, such as the marketer’s advertising and customer lists. While telling the marketers it has not yet determined whether they are violating the FCRA, the FTC reserves its right to take action against them based on past or future law violations and further warns that their practices could also be subject to laws enforced by other federal, state, or local authorities.

Lawyers in Ballard Spahr’s Consumer Financial Services Group and its Privacy and Data Security Group regularly provide advice to clients on FCRA compliance and defend clients in FCRA lawsuits.

The firm’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs).

The firm’s Privacy and Data Security Group includes experienced lawyers who help clients navigate the many laws designed to safeguard health, financial, and other private information, counsel clients on compliance, data mining, online marketing, and mobile privacy, and assist clients in responding to security breaches.

The Consumer Financial Services Group also produces the CFPB Monitor, a blog that focuses exclusively on important Consumer Financial Protection Bureau developments. To subscribe, use the link provided to the right.

For more information, please contact Practice Leader Alan S. Kaplinsky, 215.864.8544 or; Practice Leader Jeremy T. Rosenblum, 215.864.8505 or; John L. Culhane, Jr., 215.864.8535 or; or Beth Moskow-Schnoll, 302.252.4447 or


Copyright © 2012 by Ballard Spahr LLP.
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