The Federal Trade Commission is on a roll. In their latest enforcement action, the FTC fined background report providers TruthFinder and Instant Checkmate $5.8 million to settle allegations they deceived consumers regarding whether or not they had criminal records, a violation of the Fair Credit Reporting Act. The companies also failed to ensure the “maximum possible accuracy” on their consumer reports, though they touted their information as “the most accurate information available to the public.”

In addition to the fines, the proposed order also includes the following provisions:

• TruthFinder and Instant Checkmate must establish and implement “a comprehensive monitoring program to regularly review, assess and determine the extent to which each of the companies” is operating as a credit reporting agency. Where they are doing so they must comply with the Fair Credit Reporting act.
• The companies are permanently prohibited from misrepresenting the accuracy of the information provided in their reports or any misrepresentation similar to those outlined in the FTC’s complaint.
• Customers who have a material relationship to either of the defendants or who receive compensation for positive reviews must disclose the relationship and, if paid, must indicate they were compensated for their reviews.

A federal judge from the US District Court for the Southern District of California must approve the proposed order before it is enforceable.

Companies profited by misleading consumers

Based in California, TruthFinder and Instant Checkmate marketed their services to users who wanted to search for people and get unlimited background reports in exchange for monthly subscription fees. According to the FTC, the companies made millions from their subscriptions by using marketing emails and push notifications that indicated someone they had searched for had a criminal or arrest record. In some cases, the individuals had traffic tickets, not arrest records.

“Companies that compile personal information and sell background reports are on notice: Don’t make false claims about the contents of your reports,” said Samuel Levine, Director of the Bureau of Consumer Protection, in a September 11, 2023 news release. “And, if you market your reports to be used to screen tenants or employees, you are a consumer reporting agency and you must follow the requirements of the FCRA.”

Specifically, TruthFinder and Instant Checkmate claimed in ads and other promotions that their background reports contained “the most accurate information available to the public.” However, the companies obtained their information from third parties who expressly disclaim that the information is accurate, yet TruthFinder and Instant Checkmate did not take any actions to verify the accuracy of the information. According to TruthFinder’s FAQs, they obtain data from public record data sources, including federal, state and county databases.

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The FTC complaint said the companies deceived consumers by providing “Remove” and “Flag as Inaccurate” buttons that did not work as promised. The “Remove” button was supposed to remove disputed information from the report. It actually only removed that information from the customer’s copy of the report; it was still visible to other users. The FTC also alleges that the information marked by a customer as “Flag as Inaccurate” was never reviewed or researched by TruthFinder and Instant Checkmate.

Though the companies’ websites said they were not consumer reporting agencies, TruthFinder and Instant Checkmate collected and evaluated consumer information in background reports that were then marketed and sold as reports for employment and tenant screening. The FTC said the companies used search engine advertising keywords including “best background check for landlords” and “pre-employment screening.” In addition, in 2014, Instant Checkmate agreed to settle an FTC complaint for acting as a consumer reporting agency, so Instant Checkmate was aware of the Fair Credit Reporting Act rules. Instant Checkmate was fined $525,000 in that case.

TruthFinder and Checkmate acted as consumer reporting agencies and are, therefore, subject to the rules under the Fair Credit Reporting Act. When visitors arrive at the TruthFinder landing page, they have to click “I accept” to indicate they understand that TruthFinder is not a consumer reporting agency and they agree not to use the information received from TruthFinder “to make decisions about consumer credit, employees, tenant screening, or any other purposes that would require FCRA compliance.” This does not let TruthFinder off the hook, however.

The company’s FAQs state the following: “TruthFinder does not provide consumer reports and is not a consumer reporting agency. TruthFinder cannot be used as a background check to make decisions about consumer credit, employment, insurance, tenant screening, or any other purpose that would require FCRA compliance.”

Adding insult to injury, the companies violated the Fair Credit Reporting Act by giving background reports to people who did not have a legitimate purpose for obtaining them. The FTC alleged the companies did not implement “reasonable procedures” to limit who could access a background report. Also, the companies offered one free premium background report in exchange for posting a positive user review, attempting to minimize negative reviews. They did not tell customers they needed to disclose they were being compensated for their review.

TruthFinder

A TruthFinder subscription ranges in price from $4.99 to $29.73 per month. It is an automatically renewable subscription with three plan options: People Search ($28.05 a month or $23.28 a month paid bimonthly), Reverse Phone Lookup ($4.99 a month), and Reverse Email Lookup ($29.73 a month). Additional services are available for a fee. PDF/Report monitoring is available for $3.99 a month, and dark web monitoring is available for $2.99 a month.

Instant Checkmate

Instant Checkmate offers People Search, Reverse Phone Lookup, Criminal & Traffic Records, and Inmate Search. The home page does not require the user to click an agreement to enter information. However, at the bottom of the page in tiny print, the site includes a disclaimer that says they do not provide consumer reports; the information may not be 100% accurate, complete or up to date; and users may not use their information to make decisions about consumer credit, employment, insurance, tenant screening or other purposes that would require the company to comply with the Fair Credit Reporting Act.

Pricing for Instant Checkmate is harder to find than on TruthFinder. It can be accessed through the site’s FAQs. Instant Checkmate offers Person Reports for $35.12 per month for one month or $28.09 per month for three months (paid at once) and Phone Reports for $5.99 a month for one month. They also offer add-ons: downloadable report files for a one-time fee of $3.99 and dark web monitoring for $1.99 a month. There are caveats that pricing may be modified or plans may be removed without notice.

Insider Take

It is disheartening to see companies repeatedly attempt to deceive consumers by skating around federal regulations. In this case, the companies benefited financially by duping consumers and charging them subscription fees for information that could be obtained via public record and that may not have been accurate. We find it particularly disconcerting that Instant Checkmate was charged and fined for the same offense previously, yet are still be allowed to do business.

Here are a few takeaways for subscription companies, regardless of their industry:

• Ensure you are in compliance with all local, state and federal regulations. A best practice to ensure compliance is to have a compliance officer on staff or contract with a compliance expert that will ensure your business practices, processes and procedures comply with all relevant regulations.
• Be transparent. Though different jurisdictions have varying regulations regarding “clear and conspicuous” terms and conditions, it is a best practice to show all terms, conditions and in some cases disclaimers where they cannot be missed by a subscriber. TruthFinder does a better job of this with their pop-up box on the home page. Instant Checkmate fails miserably by putting their disclaimer at the bottom of the home page in tiny print. This information should be included on the sign-up page so consumers will see it before they subscribe.
• Disclose material terms and relationships on user reviews. If a reviewer works for the company or is a customer who was paid for their review, that information should be disclosed in the review. “Customer was compensated for this review by ABC Company LLC.”

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