Background Check Company Settles Lawsuit with CFPB over Credit Report Errors

The Consumer Financial Protection Bureau (CFPB) filed a lawsuit against Sterling Infosystems Inc., alleging that the background check company used inaccurate background checks.

According to the CFPB’s lawsuit, Sterling Infosystems used imprecise methods of screening the criminal records of job seekers. Based on third-party data that was left unverified, the company allegedly applied so-called high risk indicators to certain job seekers’ profiles.

The CFPB alleged that Sterling violated the Fair Credit Reporting Act by failing to use reasonable policies that would help avoid the maximum amount of credit report errors. These reports are important for a lot of reasons, not least of which is that employers use these reports to help screen potential new hires. The CFPB said that Sterling’s failure to have policies that would eliminate the maximum number of credit report errors lasted for several years, between December 2012 and July 2016.

How Did These Errors Impact Consumers?

“Defendant’s procedures, failure to follow its procedures, or lack of procedures…led defendant to report erroneous adverse items of information about applicants in their consumer reports,” said the CFPB. This could have had a major impact on thousands of consumers. “These errors had the potential to result in the denial of employment, missed economic opportunities, and reputational harm to applicants.”

The CFPB said that up until December 2014, Sterling’s method of checking consumers’ criminal backgrounds involved just their first and last names, along with their date of birth. This method, the agency said, left the door wide open for errors based on the wrong person’s records being accessed by accident. While the company had a department dedicated for settling disputes over credit report errors, CFPB argued that the occurrence of these errors in the first place could cause irreparable harm, as job seekers may already have been rejected as an applicant by the time the errors were corrected.

Sterling Infosystems agreed to an 8.5 million dollar settlement, which includes a civil penalty of 2.5 million dollars going to the CFPB, along with 6 million dollars being distributed among thousands of consumers affected. Indeed, the proposed settlement says that more than 7,000 consumers were affected by the inaccurate or misleading reports. While the settlement agreement brings an end to these allegations and provides compensation for the CFPB and for affected consumers, the company does not admit any liability on its part.

Under federal law, anyone can check their credit report score for free once a year each from three major credit bureaus.

If you have noticed one or more credit report errors, you may be able to join a class action lawsuit investigation. Pursuing litigation can help provide you compensation, as well as hold the company at fault responsible for their actions.

Consulting an attorney can help you determine if you have a claim, navigate the complexities of litigation, and maximize your potential compensation.

The Credit Report Errors Lawsuit is Case No. 1:19-cv-10824, in the U.S. District Court for the Southern District of New York.

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If you have errors on your credit report, you may qualify to participate in a credit report lawsuit investigation.

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This article is not legal advice. It is presented
for informational purposes only.