Thursday, October 29th, 2015
October 29, 2015
Office of Communications
Tel: (202) 435-7170
CONSUMER FINANCIAL PROTECTION BUREAU TAKES ACTION AGAINST TWO OF THE LARGEST EMPLOYMENT BACKGROUND SCREENING REPORT PROVIDERS FOR SERIOUS INACCURACIES
General Information Services and Affiliate Failed to Verify the Accuracy of Consumer Reports Sold to Employers about Job Applicants
WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) took action against two of the largest employment background screening report providers for failing take basic steps to assure the information reported about job applicants was accurate. The serious inaccuracies reported by General Information Services and its affiliate, e-Background-checks.com, Inc. (BGC), potentially affected consumers’ eligibility for employment and caused reputational harm. The CFPB is ordering the companies to correct their practices, provide $10.5 million in relief to harmed consumers, and pay a $2.5 million civil penalty.
“General Information Services and its affiliate failed to take basic steps to provide accurate background screening reports to employers about job applicants,” said CFPB Director Richard Cordray. “Today, we are holding two of the largest companies in this market accountable for cleaning up the quality of their reports.”
GIS and its affiliate, BGC, collectively generate and sell more than 10 million consumer reports about job applicants each year to prospective employers. These consumer reports include criminal history information and civil records, among other types of data. Employers use the consumer reports to determine hiring eligibility of applicants and make other types of employment decisions. The companies are two of the largest background screening report providers in the United States. GIS is headquartered in Chapin, S.C., and BGC is headquartered in Dallas, Texas.
The CFPB found that GIS and BGC violated the Fair Credit Reporting Act by, among other things, failing to employ reasonable procedures to assure the maximum possible accuracy of the information contained in reports provided to consumers’ potential employers. Specifically, the CFPB found that the companies violated the law by:
- Failing to take basic steps to assure accuracy: The CFPB found that the companies failed to use basic procedures for matching public records information to the correct consumer. For example, the Bureau found that GIS did not require employers to provide consumers’ middle names, and neither company had a written policy for researching consumers with common names. The Bureau also found that GIS failed to use an audit process to adequately test the accuracy of the reports provided. The Bureau found that, between 2010 and 2014, nearly 70 percent of criminal history disputes consumers filed with GIS resulted in some change or correction to the information in the consumer’s background report. As a result, the companies provided prospective employers with inaccurate reports that included criminal records attached to the wrong consumers, dismissed and expunged records, and misdemeanors reported as felony convictions. These inaccuracies can result in the denial of employment, missed economic opportunity, and reputational harm to otherwise qualified applicants.
- Including impermissible information in consumer reports: The CFPB also found that the companies unlawfully included certain information in consumer reports they provided to prospective employers. Specifically, the CFPB found that GIS and BCG failed to take measures to prevent non-reportable civil suit and civil judgment information older than seven years from being illegally included in its reports.
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices or who otherwise violate federal consumer financial laws. Under the terms of the CFPB order released today, the companies are required to:
- Provide $10.5 million in relief to harmed consumers: The companies must identify consumers negatively affected by their conduct and provide monetary relief. The companies will pay approximately $1,000 to each affected consumer.
- Revise their compliance procedures: The companies will revise procedures to assure reporting accuracy. These procedures include using algorithms to distinguish records by middle name and match common names and nicknames, using consumer dispute data to determine the root causes of errors, and using software to identify and reconcile discrepancies.
- Retain an independent consultant: The companies will hire an independent consultant to review and assess the companies’ policies, procedures, staffing levels, and systems. The consultant will also recommend changes and improvements where necessary.
- Develop a comprehensive audit program: To test the accuracy, integrity, and completeness of the public-record information sourced to generate the companies’ background reports, the company will develop a written audit program. The audit program will be implemented at a frequency necessary to reliably test the accuracy of the companies’ background reports. At least twice a year, the companies will evaluate and adjust the audit program in light of the results and any material changes to the companies’ operations.
- Pay a civil monetary penalty of $2.5 million: Collectively, the companies will pay a $2.5 million penalty for their illegal actions.
Friday, October 23rd, 2015
Please contact us if you are in Illinois and you have a private student loan serviced by Navient or SLM.
Wednesday, October 7th, 2015
FOR IMMEDIATE RELEASE:
October 7, 2015
Office of Communications
Tel: (202) 435-7170
CONSUMER FINANCIAL PROTECTION BUREAU CONSIDERS PROPOSAL TO BAN ARBITRATION CLAUSES THAT ALLOW COMPANIES TO AVOID ACCOUNTABILITY TO THEIR CUSTOMERS
Proposal Would End the Free Pass Companies Use Against Group Lawsuits
WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) announced it is considering proposing rules that would ban consumer financial companies from using “free pass” arbitration clauses to block consumers from suing in groups to obtain relief. Buried in many contracts for consumer financial products like credit cards and bank accounts, most arbitration clauses deny consumers the right to participate in group lawsuits against companies. With this free pass, companies can sidestep the legal system, avoid big refunds, and continue to pursue profitable practices that may violate the law and harm countless consumers. The CFPB’s proposals under consideration would give consumers their day in court and deter companies from wrongdoing.
“Consumers should not be asked to sign away their legal rights when they open a bank account or credit card,” said CFPB Director Richard Cordray. “Companies are using the arbitration clause as a free pass to sidestep the courts and avoid accountability for wrongdoing. The proposals under consideration would ban arbitration clauses that block group lawsuits so that consumers can take companies to court to seek the relief they deserve.”
Many contracts for consumer financial products and services include arbitration clauses. These clauses typically state that either the company or the consumer can require disputes about that product to be resolved by privately appointed individuals (arbitrators), rather than through the court system. Where such a clause exists, either side can generally block lawsuits from proceeding in court. These clauses also typically bar consumers from bringing group claims through the arbitration process. There are arbitration clauses in all kinds of consumer financial products, from bank accounts to private student loans. They affect tens of millions of consumers. As a result, no matter how many consumers are injured by the same conduct, consumers must resolve their claims individually against the company, which few consumers do.
In the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress required the CFPB to study the use of arbitration clauses in consumer financial markets and gave the Bureau the power to issue regulations that are in the public interest, for the protection of consumers, and consistent with the study’s findings. The CFPB’s study – released in March of this year – showed that arbitration clauses restrict consumers’ relief for disputes with financial service providers by allowing companies to block group lawsuits.
The study also found that, in the consumer finance markets studied, very few consumers individually seek relief through arbitration or the federal courts, while millions of consumers are eligible for relief each year through group settlements. According to the study, more than 75 percent of consumers surveyed in the credit card market did not know whether they were subject to an arbitration clause in their contract. Fewer than 7 percent of those consumers covered by arbitration clauses realized that the clauses restricted their ability to sue in court.
Today, the Bureau is publishing an outline of the proposals under consideration in preparation for convening a Small Business Review Panel to gather feedback from small industry stakeholders. This is the first step in the process of a potential rulemaking on this issue. The proposals being considered would ban companies from including arbitration clauses that block class action lawsuits in their consumer contracts. This would apply to most consumer financial products and services that the CFPB oversees, including credit cards, checking and deposit accounts, prepaid cards, money transfer services, certain auto loans, auto title loans, small dollar or payday loans, private student loans, and installment loans.
The proposals being considered would not ban arbitration clauses in their entirety. However, the clauses would have to say explicitly that they do not apply to cases filed as class actions unless and until the class certification is denied by the court or the class claims are dismissed in court. The proposals under consideration would also require that companies that choose to use arbitration clauses for individual disputes submit to the CFPB the arbitration claims filed and awards issued. This will allow the Bureau to monitor consumer finance arbitrations to ensure that the process is fair for consumers. The Bureau is also considering publishing the claims and awards on its website so the public can monitor them.
The benefits of the proposals would include:
- A day in court for consumers: The proposals under consideration would give consumers their day in court to hold companies accountable for wrongdoing. Often the harm to an individual consumer may be too small to make it practical to pursue litigation, even where the overall harm to consumers is significant. Previous CFPB survey results reported that only around 2 percent of consumers surveyed would consult an attorney to pursue an individual lawsuit as a means of resolving a small-dollar dispute. In cases involving small injuries of anything less than a few thousand dollars, it can be difficult for a consumer to find a lawyer to handle their case. Congress and the courts developed class litigation procedures in part to address concerns like these. With group lawsuits, consumers have opportunities to obtain relief they otherwise might not get.
- Deterrent effect: The proposals under consideration would incentivize companies to comply with the law to avoid lawsuits. Arbitration clauses enable companies to avoid being held accountable for their conduct; that makes companies more likely to engage in conduct that could violate consumer protection laws or their contracts with customers. When companies can be called to account for their misconduct, public attention on the cases can affect or influence their individual business practices and the business practices of other companies more broadly.
- Increased transparency: The proposals under consideration would make the individual arbitration process more transparent by requiring companies that use arbitration clauses to submit the claims filed and awards issued in arbitration to the CFPB. This would enable the CFPB to better understand and monitor arbitration cases. The proposal under consideration to publish the claims filed and awards issued on the CFPB’s website would further increase transparency.
In addition to consulting with small business representatives, the Bureau will continue to seek input from the public, consumer groups, industry, and other stakeholders before continuing with the process of a rulemaking. When the Bureau issues proposed regulations, the public is invited to submit written comments which will be carefully considered before final regulations are issued.
An outline of the proposals under consideration is available at: http://www.consumerfinance.gov/f/201510_cfpb_small-business-review-panel-packet-explaining-the-proposal-under-consideration.pdf
A list of questions on which the Bureau will seek input from the small business representatives providing feedback to the Small Business Review Panel will be available on Wednesday at: http://www.consumerfinance.gov/f/201510_cfpb_small-business-representatives-providing-feedback-to-the-small-business-review-panel.pdf
The March 2015 report on arbitration is available at: http://www.consumerfinance.gov/reports/arbitration-study-report-to-congress-2015/
A factsheet summarizing the Small Business Review Panel process can be found at: http://www.consumerfinance.gov/f/201510_cfpb_fact-sheet-small-business-review-panel-process.pdf