9th Circuit appeal on background-screening companies & fair credit reporting

by Deepak Gupta

Brokenrecords-webI thought readers might be interested in a new appeal that my firm is handling in the Ninth Circuit, Moran v. The Screening Pros, concerning the state and federal regulation of background-check companies. You can read our opening brief here. The Consumer Financial Protection Bureau and the Federal Trade Commission have weighed in with an amicus brief, discussing a relatively narrow question of federal law. An amicus brief by the East Bay Community Law Center — on behalf of a coalition of 18 public-interest organizations including the National Consumer Law Center and the ACLU — discusses the broader policy implications.

Landlords and employers have increasingly come to rely on background-check companies to provide them with criminal history and other sensitive information about prospective tenants and employees. But the industry is more fragmented and less visible that the traditional credit bureaus and advocates are concerned that it routinely skirts state and federal fair-credit-reporting laws, with grave consequences for those who seek jobs and housing. NCLC put out a great report on this topic last year: Broken Records: How Errors by Criminal Background Checking Companies Harm Workers and Businesses.

At issue on appeal is the constitutionality of California's Investigative Consumer Reporting Agencies Act, one of the nation's strongest protections against background-screening company abuses. The district court held the Act unconstitutionally vague because it overlaps with another state fair-credit-reporting law and the court couldn't figure out which one applied. But, as the Eleventh Circuit explained in a 2009 case that also happened to arise in the fair-credit-reporting context (Harris v. Mexican Specialty Foods), it's well established that there's no vagueness when a statute "clearly defines what conduct is
prohibited and the potential range of fine that accompanies noncompliance.”

The appeal also presents a question of federal statutory interpretation: How long, under the Fair Credit Reporting Act, can a consumer-reporting agency report negative criminal-history information? The FCRA prohibits the reporting of adverse information for more than seven years. The CFPB's and FTC's brief argues that for a dismissed criminal charge, the seven-year period begins on the date of the charge, not the date of the dismissal. The district court's conclusion to the contrary relied on out-of-date FTC commentary that preceded relevant amendments to the statute. 

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