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Background Screening Firms Face Increased Scrutiny

In the wake of HireRight Solutions' $2.6 million penalty, background screening services are under greater scrutiny.

September 29, 2012

Using a background screening company has become a routine part of the hiring process for American employers. According to a recent survey by the Society for Human Resource Management, 47 percent of employers conduct credit and criminal background checks on job applicants.

But the screening industry has lately been taking a bit of a battering. The National Consumer Law Center reported in April that screening firms—or "consumer reporting agencies," or CRAs—confuse people with similar names, list one offense multiple times and fail to indicate that a person was later cleared. In August, HireRight Solutions of Tulsa, Oklahoma, agreed to pay $2.6 million to settle Federal Trade Commission allegations that it violated the Fair Credit Reporting Act, or FCRA, by failing to use reasonable procedures to ensure the accuracy of the information it was selling.

Now some experts are suggesting that employers should be more diligent in hiring screening firms—that they should, in effect, screen the screeners. "The employer really needs to kick the tires and make sure they ask enough questions," says Les Rosen, CEO of Employment of Screening Resources in Novato, California.

The HireRight case has caused a particular stir. The $2.6 million civil penalty was the second-largest ever in an FTC enforcement action alleging FCRA violations. "Clients have been asking about it," Rosen says. "They want to make sure nothing is happening similar to what FTC alleged."

Among other things, HireRight was accused of failing to ensure that information in background reports was current and reflected updates, failing to prevent the same criminal offense information from being included in a report multiple times, and in numerous cases even including the records of the wrong person in reports. It was the first time the FTC has charged a background screening firm with violating the FCRA.

"It's difficult enough in this economy to find employment," Anthony Rodriguez, a staff attorney at the FTC's Bureau of Consumer Protection, told the Washington Post. "People shouldn't have to worry about dealing with background screening information that's inaccurate."

Montserrat Miller, a partner with the law firm Arnell Golden Gregory in Washington cautions against reading too much into the HireRight case, noting that details of the company's alleged wrongdoing never became public because the case was settled. "This is the FTC saying, 'Here are some of the things we're looking at,' " she says.

But Miller adds that employers can certainly use the case as "a template to talk to CRAs about the issues raised in the settlement. They can ask, 'What are your policies and practices in these areas?'

The National Association of Professional Background Screeners offers an accreditation program for background screeners. The program is fairly new, with only about two dozen companies having so far been accredited, but Rosen sees it as an effective way of giving employers some peace of mind.

"The accreditation process is extremely intensive," he says. "It's the best way of ensuring that a background screening firm is providing accurate information in compliance with all the various laws that are involved."

Matthew Heller is a writer based in Los Angeles. Comment below or email editors@workforce.com.