UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
June 9, 1998
Mr. Richard LeBlanc
Due Diligence, Inc.
P.O. Box 8366
Missoula, MT 59807
Re: Sections 603, 607, and 609 of the Fair Credit Reporting Act
Dear Mr. LeBlanc:
This is in response to your letter concerning the application of the Fair Credit Reporting Act ("FCRA") to your company, which provides public criminal records information to its customers.
It is our understanding that your company employs independent agents in all counties in the United States. When a request for a criminal records search is received at your headquarters, employees route the request to agents in all counties where the subject has lived. These agents then go to the local courthouse or criminal records source and collect all relevant information. This is forwarded to your headquarters, where it is formatted into a report that is sent to the customer who requested the information. Your company's clients are mostly professional background investigation firms, but your company does provide criminal records information for employment purposes directly to some companies.
1. Is your company a consumer reporting agency?
The first issue is whether your company is a "consumer reporting agency" (CRA) for purposes of the FCRA. Section 603(f) of the FCRA defines a CRA as any organization which, for monetary fees, "assembles or evaluates" credit information or other information on consumers for the purpose of regularly furnishing "consumer reports" to third parties using any means or facility of interstate commerce. A "consumer report" is, in turn, defined in Section 603(d)(1) as a report containing information bearing on an individual's credit standing or his or her "character, general reputation, personal characteristics, or mode of living" that is used or expected to be used for the purpose of serving as a factor in establishing the consumer's eligibility for, among other things, employment, insurance, or credit.
You do not contest that your company meets most of the definitional requirements of a CRA: It regularly provides consumer report information (criminal records that, at the very least, concern an individual's character or general reputation) to third parties for fees using interstate commerce. However, you question whether your company's method of doing business consti-tutes "assembling" or "evaluating" information, which is a key component in the definition of a CRA. You argue that the activities of your company -- collecting information from your agents and formatting it to be sent to your customers -- do not amount to "assembling" or "evaluating" as these terms are used in the definition of "consumer reporting agency" in Section 603(f).
The terms "assemble" and "evaluate" are not defined in the FCRA. Accordingly, the common definitions must apply unless some other meaning is apparent from the statutory context or the legislative history. Our review of the entire FCRA does not indicate any special meaning for these terms, and the legislative history of the law does not show that Congress intended any special meaning to apply. Indeed, it is clear from a review of the legislative history that Congress intended for the FCRA to cover a very broad range of "assembling" or "evaluating" activities.(1) We conclude that the common meanings of these terms must be used.
From your description of its activities, it appears that, at the very least, your company "assembles" information as this term is commonly understood (dictionary definitions include "to gather" or "to collect").(2) Your company's record searchers go to local courthouses and review the records to find information. It they find information on an individual, they forward either a brief abstract or copies of the docket information. At your headquarters, a report is prepared consisting of all of the information reported by your agents from around the country. We believe that the activities you describe are sufficient to meet the definitional requirement of a CRA.
2. The status of your company's record searchers.
You ask whether the individuals who search records for your company are themselves CRAs. You describe these people as part-time truck drivers, retired persons, homemakers, and small business people. We assume that these individuals are paid either for the time that they spend collecting information or on a piecework basis.
Based on the information you have provided, we believe that these individuals are your company's agents and are not themselves CRAs. One of the key definitional requirements of a CRA is to provide reports to "third parties." When your company's record searchers deal with the company, they are not providing information to a third party; rather, their relationship with your company is a type of employment relationship. The practical effect of this is significant. Since your searchers are not CRAs, they do not have any of the duties imagined by your letter.
3. The duties of your company under the FCRA.
Your letter overstates the burdens imposed on your company as a CRA. Most signifi-cantly, because your individual records searchers are not CRAs, the information they provide does not constitute "consumer report" information. Accordingly, your company is not a "reseller" subject to Section 607(e) in relation to the information that it obtains from these record searchers and provides to its customers. See enclosed staff opinion letter (Goeke, 6/9/98.) Thus, none of the burdensome duties your letter claimed to result from application of that provision apply.
Some other portions of Section 607 would apply to your company, but compliance should be routine. First, Section 607(a) requires you to maintain "reasonable" procedures to avoid violations of Section 605 (which limits the time that adverse information may be reported by CRAs) and Section 604 (which limits the purposes for which information may be provided). We believe that it is a reasonable procedure for a CRA such as your company, which provides reports limited to publicly available information, to rely upon certifications provided by your clients that the information is to be provided for employment purposes. (You do not need to conduct the client background investigation that would be required of a CRA that provides sensitive personal information, as in a traditional credit report, to its clients.) Second, Section 607(b) requires you to maintain "reasonable" procedures to assure maximum possible accuracy. Your letter states that your company has in place "strict" procedures required by Section 613(1), indicating you will have little problem meeting your obligations under this subsection. Third, Section 607(d) requires you to provide your clients with a prescribed notice of their duties as users of consumer reports under the FCRA. A copy of that notice is enclosed.
The other provision that will impact your operation is Section 609, which imposes limited duties on your company. Its principal requirement is that CRAs disclose all the information in their files on a consumer upon request. You state in your submission that your company does not maintain on file any of the public record information that it collects; thus, it will have no file information to disclose should a consumer request it. All that remains is your obligation under Section 609(a)(3) to identify recipients of consumer reports for employment purposes in the last two years on any consumer who asks for that information, and Section 609(c) to provide such consumers a copy of a prescribed summary of their rights under the FCRA. A copy of that form is enclosed.
As you can see from our discussion, your company's activities are covered by the FCRA as outlined above when you provide information to third parties for employment or other purposes covered by the FCRA.
I hope that this information is helpful to you. The views expressed herein are the views of the Commission's staff and are advisory in nature. They do not necessarily reflect the views of the Commission or of any particular Commissioner.
Division of Credit Practices
1. For example, in committee reports accompanying various versions of the amendments to the FCRA that were ultimately enacted into law in September of 1996, there are statements that "resellers" (individuals who obtain consumer reports at bulk rates from large credit bureaus or other consumer reporting agencies for resale) are "consumer reporting agencies." Resellers, who may do nothing more than transmit to their customers a report obtained from another consumer reporting agency, clearly do less "gathering" or "collecting" of information than is done by your company. See, H.R. Rep. No. 104-185, 104th Cong., 1st Sess., at 38 (1995); S. Rep. 103-209, 103rd Cong., 1st Sess., at 16 (1993).
2. In addition, since your record searchers exercise some element of judgment in collecting information (e.g., they must decide which files at a local repository apply to the individual about whom information has been requested), your company may "evaluate" as well as "assemble" information.