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Two companies that fired workers and rejected job applicants based on background checks without informing them of their rights under the Fair Credit Reporting Act (FCRA) have agreed to settle Federal Trade Commission charges that they violated federal law. The settlements require the defendants to pay $77,000 in civil penalties and bar future FCRA violations.

Employers often conduct background checks and seek employees’ and job applicants’ credit records, criminal histories, and other background information from a consumer reporting agency (CRA) such as a credit bureau or background screening company. The FCRA requires that before taking adverse employment actions based on these consumer reports – for example, firing employees or denying job applications – employers must provide the employees or applicants with a copy of the report, identify the CRA that provided it, notify them that the CRA did not make the adverse action decision, and inform them that they have the right to obtain a free copy of the report from the CRA and dispute its accuracy.

According to the FTC’s two complaints, both defendants contracted with a CRA to conduct background checks including criminal record reviews for employees and job applicants, and made hiring and firing decisions based on those background checks. The companies allegedly failed to provide the employees and applicants with pre-adverse action notices and adverse action notices as required by the FCRA.

The settlements require Quality Terminal Services, LLC and Rail Terminal Services, LLC to pay $53,000 and $24,000 in civil penalties, respectively, and to provide the FCRA-required notices in the future. The settlements also contain record-keeping and reporting provisions to allow the FTC to monitor compliance.

The Center for Democracy and Technology (CDT) filed a petition with the Commission complaining of adverse action notice violations by the defendants. The FTC acknowledges CDT’s invaluable contribution in bringing these matters to the agency’s attention. The Commission vote to refer the complaints and stipulated final orders to the Department of Justice for filing was 4-0. The action against Rail Terminal Services was filed in the U.S. District Court for the Western District of Washington; the action against Quality Terminal Services was filed in the U.S. District Court for the District of Colorado.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. A complaint is not a finding or ruling that defendants have actually violated the law. Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the force of law when signed by the judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File No. 0823022, 0823023)
(QTS, RTS)