Written By ESR News Blog Editor Thomas Ahearn
The U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) have announced that a background report provider and its chief executive officer (CEO) were banned from engaging in deceptive negative option marketing and would pay $21 million to resolve allegations that they used “teaser background reports” to trick consumers and trap them in difficult-to-cancel subscription programs, according to an FTC press release.
A complaint filed in the U.S. District Court for the Central District of California in July of 2020 alleged the background report provider and its CEO claimed that the company’s background reports on particular individuals may contain arrest records, criminal records, and sex offender records – even when they did not include such information – to try to trick consumers into signing up for auto-renewing premium subscriptions.
The complaint alleged that the background report provider operated as a consumer reporting agency (CRA) and violated the federal Fair Credit Reporting Act (FCRA) that regulates CRAs by, among other things, failing to maintain reasonable procedures to verify how its reports would be used, to ensure the information was accurate, and to make sure that the information it sold would be used only for legally permissible purposes.
The complaint also alleged that the background report provider’s misleading billing practices violated the Restore Online Shoppers’ Confidence Act by, for example,...
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