The recent preliminary approval of a class action settlement in California highlights the importance of using multiple identifiers in background check matching procedures.
According to the court’s order granting preliminary approval of the settlement, the screening company at the heart of the case “sells credit reports that help automobile dealers manage the regulatory compliance obligations that accompany every consumer car purchase.” One key rule is that car dealers are prohibited from doing business with any specially designated national (“SDN”) identified by the Treasury Department’s Office of Foreign Assets Control (“OFAC”).
The plaintiff claimed the screening company incorrectly reported that he was on OFAC’s SDN list and, as a result, he was wrongfully denied credit to purchase a vehicle in front of his father and sister. He stated that he felt “embarrassed, ashamed, and angry.” The plaintiff requested a copy of his report and learned that a reporting error matched his name with another person identified on the SDN list. The screening company used “only first and last names when checking whether a consumer matches with anyone on the SDN list,” despite the availability of other identifiers, including date of birth and address.
The plaintiff sued the screening company on behalf of himself and similarly situated consumers, claiming the screening company violated the Fair Credit Reporting Act (“FCRA”) and California’s Consumer Credit Reporting Agencies Act (“CCRAA”) by failing to “follow reasonable procedures to assure the maximum possible accuracy of the consumer information included in its OFAC Check documents.”
On June 1, 2023, the court preliminarily approved the class action settlement. If the court issues final approval, each of the estimated 1,071 class members will receive a $1,000 payment without the need to submit a claim. Additionally, the screening company would pay:
A hearing to decide final approval is set for October 25, 2023.
This case demonstrates the significant impact a credit reporting agency’s matching procedures can have on the reliability of background reports. In addition, it highlights the importance of FCRA compliance.