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
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
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
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
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.