Background screeners that use “name-only matching” to verify the identity of job or housing applicants are violating federal law, according to an advisory opinion announced Thursday by the Consumer Financial Protection Bureau (CFPB).
“Regulators are concerned about the significant harms caused by false identity matching, where an applicant is disqualified from rental housing or a job based on having the same name as another individual with negative information in their credit history,” the bureau said in its announcement. “Specifically, the CFPB affirmed that the practice of matching consumer records solely through the matching of names is illegal under the Fair Credit Reporting Act [FCRA].”
The bureau said this is a particularly troubling practice as people work to recover financially from the coronavirus pandemic.
“When background screening companies and their algorithms carelessly assign a false identity to applicants for jobs and housing, they are breaking the law,” said CFPB Director Rohit Chopra in a statement echoed by Federal Trade Commission Chair Lina M. Khan. Khan added that the commission “strongly supports this longstanding interpretation and stands ready to work with the CFPB to protect American families.”
Chopra said name-only matching is especially likely to lead to inaccuracies in consumer reports. He said name-only matching (checking only the first and last names) omits other personally identifying information such as address, date of birth, or Social Security number. (The bureau also noted that only adding date of birth to the mix is inadequate.)
False identity matching, he added, is especially harmful for communities of color. “The risk of mismatching from name-only matching is likely to be greater among Hispanic, Black, and Asian individuals because there is less surname diversity in those populations than among the non-Hispanic white population,” he said. “As a result, these illegal acts further reinforce and exacerbate racial disparities in access to employment and affordable housing.”
Chopra said the bureau plans additional steps to address this issue, including:
- Closely collaborating on enforcement actions with the FTC. With respect to background screening, he said the FTC may be able to prosecute unfair or deceptive conduct not covered by the Consumer Financial Protection Act.
- Seeking under the FCRA to redress the full range of harms to victims, in addition to civil penalties. Chopra noted the law authorizes the bureau to seek restitution and damages for violations of the FCRA. He said the CFPB also will make appropriate referrals, including to the Department of Justice’s Civil Rights Division, when the conduct might implicate violations of anti-discrimination laws.
- Supporting the FTC in its work to monitor business models that rely on harvesting and monetizing personal data. “Big Tech giants and less well-known data brokers may be trafficking data and consumer reports that triggers obligations under the FCRA, including restrictions on permissible purposes,” he said. “The CFPB will be using its tools to ensure that individuals are protected in accordance with the law.”
Advisory opinion (notice for Federal Register)