February 7th, 2012

FTC Sends Warning to Marketers of Mobile Apps for Background Screening

The Federal Trade Commission (FTC) recently warned the marketers of several mobile apps that they may be violating the Fair Credit Reporting Act (FCRA), a federal law enforced by the FTC. Each of the apps at issue include background screening functionality.

The companies that received the warning letters are InfoPay, Inc., marketer of the "Criminal Pages" app, Everify, Inc., marketer of the "Police Records" app, and Intelligator, Inc., marketer of "Background Checks", "Criminal Records Search", "Investigate and Locate Anyone", and "People Search and Investigator" apps.

These app marketers were warned that if they have reason to believe the background screening reports generated by their apps are being used for employment screening, housing, credit, or other similar purposes, they must comply with the FCRA.

Under the FCRA, app marketers can be deemed "consumer reporting agencies" if they provide information that relates to an individual's character, reputation, or personal characteristics to a third party, and such information is used or expected to be used for employment, housing, credit or similar purposes. Consumer reporting agencies are required by law to comply with several different FCRA provisions, including taking reasonable steps to ensure the maximum possible  accuracy of the information provided in consumer reports, and providing employers with certain information about their obligations under the FCRA. The FTC indicated that it would evaluate several factors to determine whether an app developer had reason to believe that its app was being used for employment or other FCRA purposes, such as advertising placements and customer lists.

According to the warning letters, the agency has not yet made a determination about whether the three marketers are in violation of the FCRA. Nevertheless, in its warning letters the agency encouraged the marketers to review their apps and policies for compliance.

This latest action by the FTC comes on the heels of its first settlement involving mobile apps, and at a time when other agencies have signaled their intention to increase scrutiny of the mobile apps business. Moreover, as one FTC staffer has noted, "'App law' may be a developing area, but savvy businesses take it as a given that well-settled consumer protection principles carry forward as transactions go mobile."

Read full FTC press release - FTC Warns Marketers That Mobile Apps May Violate Fair Credit Reporting Act.

If you have any questions about mobile app development or mobile advertising, please contact Terri Seligman at tseligman@fkks.com or (212) 826 5580, or any other member of Frankfurt Kurnit’s Technology, Digital Media, and Privacy Group.