The FTC will require background report providers TruthFinder and Instant Checkmate to pay $5.8 million to settle charges that they deceived consumers about whether consumers had criminal records and that the companies violated the Fair Credit Reporting Act (FCRA) by operating as consumer reporting agencies.

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION, Plaintiff, v. INSTANT CHECKMATE, LLC, a limited liability company; TRUTHFINDER, LLC, a limited liability company; THE CONTROL GROUP MEDIA COMPANY, LLC, a corporation; INTELICARE DIRECT, LLC, a limited liability company; PUBREC, LLC, a limited liability company, Defendants.

Case No. 23-CV-1674 TWR (MSB)

COMPLAINT FOR PERMANENT INJUNCTION, MONETARY RELIEF, OTHER EQUITABLE RELIEF, AND CIVIL PENALTIES

Plaintiff, the Federal Trade Commission ("FTC"), for its Complaint alleges:

• The FTC brings this action under Sections 5(a) and 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 45(a) and 53(b); and Section 621(a) of the Fair Credit Reporting Act, 15 U.S.C. § 1681s(a), which together authorize the FTC to seek, and the Court to order, permanent injunctive relief, monetary relief, civil penalties, and other relief for the numerous acts and practices of Defendants in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§ 1681-1681x.

SUMMARY OF CASE

• Defendants sell consumer background reports through subscriptions on their websites InstantCheckmate.com and TruthFinder.com, which allow users of the websites to run background searches using an individual's name and, optionally, city and state of residence.
• Through their operation of the Instant Checkmate and TruthFinder services, Defendants have violated the FTC Act and the FCRA by:
  • Deceptively claiming their background reports are the most accurate reports available to the public, without substantiation;
  • Deceptively claiming an individual has criminal or arrest records when the individual does not have criminal or arrest records or only has traffic violations;
  • Deceptively claiming that consumers can "Remove" or "Flag as Inaccurate" information in background reports;
  • Deceptively failing to disclose that third-party reviews were incentivized and that the reviewers had a material connection to TruthFinder; and
  • Failing to comply with the FCRA.

JURISDICTION AND VENUE

• This Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331, 1337(a), 1345, and 1355.
• Venue is proper in this District under 28 U.S.C. §§ 1391(b)-(d), 1395(a), and 15 U.S.C. § 53(b).

PLAINTIFF

• The FTC is an independent agency of the United States Government created by the FTC Act, which authorizes the FTC to commence this district court action by its own attorneys. 15 U.S.C. §§ 41-58, and the FCRA, 15 U.S.C. §§ 1681-1681x. The FTC enforces Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The FTC also enforces the FCRA, 15 U.S.C. §§ 1681-1681x, which imposes duties upon consumer reporting agencies.

DEFENDANTS

• Defendant Instant Checkmate, LLC ("Instant Checkmate") is a Delaware limited liability company, registered in California, with its principal office or place of business at 375 Camino de la Reina, Suite 400, San Diego, CA 90218. Instant Checkmate transacts or has transacted business in this District and throughout the United States. In 2014, Instant Checkmate entered into a consent order to settle Plaintiff's allegations that Instant Checkmate failed to comply with requirements of the FCRA while promoting its background screening products for use in employment and tenant screening. United States v. Instant Checkmate, Case No. 3:14-cv-0675 (S.D. Cal. Apr. 1, 2014).
• Defendant TruthFinder, LLC ("Truth Finder") is a Delaware limited liability company, registered in California, with its principal office or place of business at 375 Camino de la Reina, Suite 400, San Diego, CA 90218. TruthFinder transacts or has transacted business in this District and throughout the United States.
• Defendant Intelicare Direct, LLC ("Intelicare Direct") is a Delaware limited liability company, registered in California, with its principal place of business at 9596 Chesapeake Avenue, Suite A, San Diego, CA 92123, and its manager or member address at 375 Camino de la Reina, Suite 400, San Diego, CA 90218. Intelicare Direct transacts or has transacted business in this District and throughout the United States.
• Defendant The Control Group Media Company, LLC ("The Control Group") is a Delaware limited liability company, registered in California, with its principal office or place of business at 375 Camino de la Reina, Suite 400, San Diego, CA 90218. The Control Group transacts or has transacted business in this District and throughout the United States.
• Defendant PubRec, LLC ("PubRec") is a Delaware limited liability company, registered in California, with its principal office or place of business at 375 Camino de la Reina, Suite 400, San Diego, CA 90218. PubRec transacts or has transacted business in this District and throughout the United States.

COMMON ENTERPRISE

• In 2017, TruthFinder, Instant Checkmate, The Control Group, and Intelicare Direct were owned by the same holding company. In 2018, that holding company created PubRec and transferred to it the ownership of TruthFinder, Instant Checkmate, The Control Group, and Intelicare Direct. Since 2018, PubRec has wholly owned TruthFinder, Instant Checkmate, The Control Group, and Intelicare Direct.
• Each of these companies—PubRec, Instant Checkmate, TruthFinder, The Control Group, and Intelicare Direct (collectively "Defendants")—have operated as a common enterprise while engaging in the unlawful acts and practices alleged below. Neither Instant Checkmate nor TruthFinder have any employees. Rather, The Control Group's employees provide product, engineering, information technology, marketing, legal, human resources, and finance and accounting services, among others, for the benefit of Instant Checkmate, TruthFinder, and Intelicare Direct. Under the supervision of The Control Group, Intelicare Direct's employees provide customer support services to Defendants' customers. Defendants have conducted the business practices described below through an interrelated network of companies that have common ownership, officers, managers, financial arrangements, business functions, employees, and office locations. Because these Defendants have operated as a common enterprise, each of them is jointly and severally liable for the acts and practices alleged below.

COMMERCE

• At all times relevant to this Complaint, Defendants have maintained a substantial course of trade in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44.

DEFENDANTS' BUSINESS ACTIVITIES

• InstantCheckmate.com and TruthFinder.com feature search boxes allowing a user to submit information pertaining to an individual about whom the user would like to obtain a background report. A user initiates a search by submitting an individual's first and last name or initials, and, optionally, a city and state (collectively, a "User Query").
• Defendants use proprietary software to create, develop, and assemble background reports by querying or "calling" third-party data providers. The third-party data providers are called and recalled based on the existence of new criteria from other providers. Once all third-party data providers have been exhausted, Defendants' software automatically runs a series of pre-programmed de-duplication, filtering, and sorting processes on the results. The end-result of this process is a unique product, a TruthFinder or Instant Checkmate background report. Instant Checkmate and TruthFinder background reports generally include, among other things, name, date of birth, home and cell phone numbers, address history, relatives, arrest and criminal records, government license information, social media or dating profiles, and email addresses.
• Though the TruthFinder and Instant Checkmate websites allow users to initiate searches and view and select from initial results for free, users cannot access full background reports without subscribing to TruthFinder or Instant Checkmate.
• Exact prices have varied between 2017 and the present, but Defendants have generally sold Instant Checkmate recurring subscriptions for approximately $34.00 per month and TruthFinder recurring subscriptions for approximately $27.00 per month. Subscribers can conduct unlimited User Queries. Subscriptions to Instant Checkmate and TruthFinder automatically renew each month unless the subscriber takes affirmative steps to cancel. From 2017-2020, TruthFinder averaged approximately 523,000 subscribers in any given month, with average net revenue of approximately $120 million per year. Instant Checkmate averaged approximately 368,000 subscribers in any given month, with average net revenue of approximately $75 million per year.

I. THE FTC ACT

• Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), prohibits "unfair or deceptive acts or practices in or affecting commerce."

Deceptive Claims of Accuracy

• Defendants have disseminated or have caused to be disseminated advertisements and promotional materials, including online banner and search engine advertisements and statements on the TruthFinder and Instant Checkmate websites, touting the accuracy of TruthFinder and Instant Checkmate background reports. For example, Defendants claim in advertisements that Instant Checkmate and TruthFinder reports contain "the MOST ACCURATE information available to the public" (emphasis in original) or "the Most Accurate Data Available to Civilians Online."
• Defendants' accuracy claims have been displayed to consumers millions of times, and in hundreds of thousands of instances, consumers have clicked on these ads and been directed to the TruthFinder or Instant Checkmate websites.
• Defendants lack a reasonable basis for asserting that the information available through Defendants' background report services is accurate because, among other things:
  • Defendants do not know, and have made no effort to verify, whether the information they receive from their third-party data providers is accurate or current when they include it in background reports that they provide to users;
  • Defendants' third-party data providers explicitly disclaim any warranty of the accuracy of the information and state that they provide data as-is;
  • Defendants have failed to take reasonable measures to test or assess the accuracy of TruthFinder or Instant Checkmate reports; and
  • In numerous instances, when consumers have contacted Defendants to report that Instant Checkmate or TruthFinder reports contained erroneous information, Defendants have not verified, investigated, or corrected reported inaccuracies.
• Additionally, from at least 2018 to 2020, many TruthFinder subscribers had access to an additional service called Guardian Protection Suite, which allowed those subscribers to "claim" TruthFinder reports about themselves and edit those reports by removing any item except for criminal records and by adding additional information. Defendants did not take any steps to ensure that the reports, as edited by Guardian Protection Suite subscribers, were accurate.
• Thousands of consumers have complained to Defendants about inaccuracies in Defendants' background reports. In numerous instances, consumers have stated that they located inaccurate information about themselves in Defendants' background reports.

Deceptive Claims That An Individual Has Criminal or Arrest Records

• Defendants have promoted their background reports by implicitly or explicitly representing that searched-for individuals have criminal and/or arrest records that can be discovered by purchasing TruthFinder or Instant Checkmate subscriptions. Defendants have made these claims by multiple means, including on the TruthFinder and Instant Checkmate websites, in automated messages that Defendants periodically cause to appear on consumers' computer or mobile device screens ("push notifications"), in customized marketing emails to prospective customers, and in search-engine advertisements.
• For example, Defendants have represented that individuals have criminal or arrest records that can be viewed by visiting the TruthFinder or Instant Checkmate website in advertisements that have been displayed in response to Google and Bing searches for proper names. For example, if a consumer searched for the name "John Smith," the consumer might have been shown an advertisement stating: "John Smith May Have Arrests," "Check John Smith's Arrests," or "Find criminal records, phone, address, & more on John Smith." Clicking on these ads directed consumers to the TruthFinder or Instant Checkmate website

• In another example of Defendants' criminal and arrest records claims, after the submission of a User Query, but before the consumer is prompted to purchase a subscription in order to access the requested report, Defendants have made statements on the TruthFinder and Instant Checkmate websites such as:

  • "The arrest records sections of your report WILL SHOW arrest or conviction records associated with the name [John Smith]";
  • "Your report WILL REVEAL important court records and sensitive legal information associated with the name [John Smith]. We'll reveal arrest details from case numbers [XXXXX-XXXXX]"; and
  • "We found [some number of] CRIMINAL RECORDS for people associated with the name [John Smith] in [State]."

• In numerous instances, Defendants' representations that searched-for individuals have or may have criminal and/or arrest records that can be obtained from TruthFinder or Instant Checkmate have been false, including because the individuals' TruthFinder or Instant Checkmate reports do not contain criminal or arrest records, or contained only non-criminal traffic violations.

• Only after purchasing a subscription to TruthFinder or Instant Checkmate are consumers able to view the information in background reports.

• In numerous instances, after seeing Defendants' representation that an individual's background report contains criminal and/or arrest records, consumers have purchased subscriptions to TruthFinder or Instant Checkmate only to discover that the background report in question includes only traffic violations.

• Consumers have submitted numerous complaints to Defendants about this deceptive practice.

Deceptive "Remove" and "Flag as Inaccurate" Features

• Defendants have displayed buttons labeled "Remove" and "Flag As Inaccurate" within or alongside TruthFinder and Instant Checkmate reports when subscribers view those reports on Defendants' websites.

• The "Remove" buttons appear next to specific items of information within TruthFinder and Instant Checkmate reports, such as an email address or phone number.

• When a customer clicks the "Remove" button next to an item of information in a background report, the item disappears from the report as displayed to that customer.

• However, items of information "removed" from background reports remain visible to other customers who search for the same person.

• Defendants take no action to investigate the accuracy of the information that a consumer has disputed with the "Remove" feature, to modify the contents of reports from which subscribers have attempted to "remove" information, to indicate to other customers that any information has been "removed," or otherwise to correct reports from which information has been "removed."

• The "Flag As Inaccurate" buttons have appeared at the top of customers' web browsers while they are viewing TruthFinder and Instant Checkmate reports.

• Customers can use the buttons to "flag" individual sections of the reports, including contact information and criminal records.

• In numerous instances, when customers have interacted with the "Flag As Inaccurate" buttons, Defendants have presented customers with a pop-up that has contained statements such as: "We strive for report accuracy to improve our product. If you've found something inaccurate within the contact section of [report subject]'s report, please tell us about it."

• In numerous instances, the pop-up has also asked the customer to submit additional information, including by posing questions such as:

  • "Why is this data inaccurate?"
  • Possible responses include: "It is out of date;" "It's not the correct person;" and "It's missing information."

• To submit a response, the user must click on a green button labeled "FLAG AS INACCURATE."

• If a user clicks this button, a second pop-up is displayed stating that the information "has been flagged for inaccurate data" and, for Instant Checkmate, "Our data team will review this information."

• Defendants take no action to investigate the accuracy of flagged reports, to modify the contents of the report, to indicate to other customers that the reports have been "flagged," or otherwise to correct the specific reports that have been flagged.

• Defendants have directed customers to use the "Remove" and/or "Flag As Inaccurate" buttons to remedy inaccuracies in TruthFinder and Instant Checkmate reports, including during customer service communications.

• In fact, neither the "Remove" nor the "Flag As Inaccurate" buttons remove or correct information from background reports.

• Millions of customers have interacted with the TruthFinder or Instant Checkmate "Remove" or "Flag as Inaccurate" buttons.

• Numerous customers have complained to the company that inaccurate information has reappeared in reports about themselves or family members after the customers have clicked the "Remove" buttons, or that reports were not corrected after the customers clicked the "Flag as Inaccurate" buttons.

Deceptive Failure to Disclose Incentivized Endorsements

• Defendants have attempted to increase the number of positive reviews of Instant Checkmate and TruthFinder's background reports on third-party consumer review website HighYa. This would have the effect of reducing the prominence and percentage of negative reviews.

• HighYa's website recommends that merchants not offer free products in exchange for reviews because "this practice creates a feeling of obligation among reviewers to only leave 5-star feedback," and further advises consumers, "If a company is offering to pay for a review, our experience has shown that this does not benefit consumers in any way, and it also violates our Terms and Conditions. If a company reaches out and offers to pay you for a review (using money or in exchange for services), please report them using our contact form."

• Nevertheless, Defendants promised to provide consumers one free premium report credit in exchange for posting a review of Defendants' products on HighYa.

• Each premium report credit could be redeemed for a "premium" TruthFinder or Instant Checkmate report. A premium TruthFinder report cost approximately $17.99. A premium Instant Checkmate report cost approximately $19.99.

• Defendants did not advise customers to disclose, and few, if any, disclosed, that they were offered a premium report credit in exchange for posting a review.

II. The Fair Credit Reporting Act (FCRA)

• The FCRA, 15 U.S.C. §§ 1681-1681x, imposes obligations on consumer reporting agencies ("CRAs") that assemble and evaluate consumer reports in order to protect the confidentiality, accuracy, relevancy, and proper utilization of such information. These obligations include maintaining reasonable procedures to ensure the maximum possible accuracy of consumer reports, limiting the furnishing of consumer reports to individuals who certify they will use the reports only for certain permissible purposes, conducting reasonable reinvestigations when consumers dispute the accuracy of information in their consumer reports, and providing users of consumer reports with notice of their own obligations under the FCRA.

• Section 621 of the FCRA, 15 U.S.C. § 1681s, authorizes the FTC to enforce compliance with the FCRA by all persons subject thereto, except where enforcement is committed to another governmental agency, irrespective of whether the person is engaged in commerce or meets other jurisdictional tests set forth by the FTC Act.

• Section 621(a)(2) of the FCRA, 15 U.S.C. § 1681s(a)(2), as adjusted by 16 C.F.R. § 1.98(m), authorizes the Court to award monetary civil penalties of not more than $4,705 per violation for each knowing violation of the FCRA, which constitutes a pattern or practice of violations of the statute. The Court is authorized to award the civil penalty under the Federal Civil Penalties Inflation Adjustment Act of 1990 and the Debt Collection Improvement Act of 1996.

• Defendants' violations of the FCRA have been knowing and have constituted a pattern or practice of violations as required by Section 621 of the FCRA, 15 U.S.C. § 1681s(a)(2).

Defendants as Consumer Reporting Agencies (CRAs)

• Defendants are CRAs because they regularly engage in the practice of assembling or evaluating information on consumers into background reports and market, promote, and sell these background reports for employment and tenant screening purposes.

• Section 603(f) of the FCRA, 15 U.S.C. § 1681a(f), defines a CRA as any person who, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, using any means or facility of interstate commerce for preparing or furnishing consumer reports.

• FCRA Section 603(d), 15 U.S.C. § 1681a(d), defines a "consumer report" as any written, oral, or other communication of information by a CRA bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living, used or expected to be used as a factor in establishing the consumer's eligibility for credit, insurance, employment, or other purposes authorized under Section 604.

• Section 604 authorizes CRAs to provide consumer reports to persons with a legitimate business need in connection with a transaction initiated by the consumer, such as for tenant screening. 15 U.S.C. § 1681b(a)(3)(F)(i).

• Defendants have regularly engaged in the assembly of information on consumers into Instant Checkmate and TruthFinder background reports, which generally include names, dates of birth, phone numbers, address histories, relatives, arrest and criminal records, government license information, and social media profiles, and have sold those reports to the public.

• Since at least January 1, 2017, Defendants have used search engine advertising keywords in their marketing and advertising to promote the use of both Instant Checkmate and TruthFinder background reports for use in employment and tenant screening.

• As part of this advertising campaign, Defendants have purchased thousands of Microsoft Advertising and Google Ads keywords that relate to employment or tenant screening, directing Microsoft and Google to display Instant Checkmate and TruthFinder advertisements when consumers use the search engines Bing (operated by Microsoft) or Google to search for these or related terms.

• Defendants' search engine advertising keywords have included terms such as:

  • "nanny background check"
  • "pre-employment screening"
  • "criminal background checks for employment"
  • "best background check for landlords"
  • "background check companies for landlords"
  • "tenant background check"
  • "consumer reporting agency background check"
  • "Mary Tenant"
  • "Kevin Job"
  • "Melissa Credit"
  • "free employee background check"
  • "how to check employee background"
  • "texaco employees"
  • "maryland nanny"
  • "trinidad job"
  • "+background +check +employment"
  • "+natalie +landlord"
  • "employee +background +check +services"
  • "summer nanny"
  • "cesar hire"
  • "florida tenant"
  • "mason hire"

• In numerous instances, Defendants selected the "broad" match setting for Microsoft or Google advertising keywords containing terms that relate to employment, tenant, or credit screening under the FCRA. The "broad" match setting instructs Microsoft or Google to display advertisements when consumers search for not only the keyword itself but also synonyms and related terms.

• Since January 1, 2017, Defendants' inclusion of keywords related to employment, credit, and tenant screening in their ad campaigns has resulted in Instant Checkmate or TruthFinder ads being displayed to consumers more than a million times.

• Defendants were on notice that their use of these keywords implicated the FCRA because, in 2014, Instant Checkmate entered into a consent agreement to settle allegations that it failed to comply with requirements of the FCRA while promoting its background screening products for use in employment and tenant screening, including by using search engine advertising keywords that relate to employment and tenant screening.

• Additionally, since at least January 1, 2017, Defendants have known that their customers have regularly used Instant Checkmate and TruthFinder background reports for employment and tenant screening.

• In numerous instances, customers directly communicated to Defendants, including by email and phone calls, that they had used or were using Instant Checkmate and TruthFinder background reports for employment or tenant screening.

• In numerous instances, when a prospective customer contacted Defendants and indicated an intent to use their background report services for employment or tenant screening, Defendants failed to take steps to prevent the prospective customer from using Defendants' background report services.

• In numerous instances, after a user disclosed past or present use of Defendants' reports for employment or tenant screening, Defendants failed to disable the user's access to the background report services, instead allowing them to continue using the product for the duration of their current subscriptions and to purchase new subscriptions in the future should they choose to do so.

• Because Defendants regularly engage in the practice of assembling or evaluating information on consumers into background reports and, among other things, market, promote, and sell the background reports for employment and tenant screening purposes, Defendants are CRAs.

• Despite Defendants' promotion of TruthFinder and Instant Checkmate reports for employment and tenant screening, and their knowledge that their background report services have regularly been used for such purposes, Defendants failed to comply with the requirements of the FCRA as described below.

Selling Consumer Reports Without a Permissible Purpose

• Section 604(a) of the FCRA, 15 U.S.C. § 1681b(a), permits a CRA to furnish a consumer report for purposes authorized in the statute and for no other purpose. These "permissible purposes" include, but are not limited to, using the consumer report in connection with a credit transaction, for employment purposes, or for a legitimate business need in connection with a transaction initiated by the consumer (e.g., for tenant screening).

• Section 607(a) of the FCRA, 15 U.S.C. § 1681e(a), requires CRAs to maintain reasonable procedures to limit the furnishing of consumer reports only for permissible purposes. The reasonable procedures mandated by Section 607(a) include:

  • Requiring the prospective user of the information to identify themselves, certify the purposes for which the information is sought, and certify that the information will be used for no other purposes.

  • Making a reasonable effort to verify the identity of a new prospective user and the uses for the consumer report certified by that prospective user before furnishing a consumer report.

  • Limiting the furnishing of consumer reports to the purposes listed under Section 604.

• Defendants do not maintain any procedures to limit the furnishing of consumer reports only for permissible purposes.

• In numerous instances, Defendants have furnished Instant Checkmate or TruthFinder background reports to individuals when Defendants did not have reason to believe that the individuals intended to use the reports for permissible purposes.

• Each instance in which Defendants have furnished a consumer report without a permissible purpose, or without maintaining the procedures required by Section 607(a) of the FCRA, 15 U.S.C. § 1681e(a), constitutes a separate violation for which Plaintiff may seek monetary penalties.

Failure to Follow Requirements for Furnishing Consumer Reports for Employment Purposes

• Section 604(b) of the FCRA, 15 U.S.C. § 1681b(b), requires CRAs that furnish consumer reports for employment purposes to:

  • Obtain a certification that the user has complied with certain consumer notice requirements, including that the user (i) has provided a standalone written disclosure to the consumer that a consumer report may be obtained, (ii) has obtained the written consent of the consumer to obtain a consumer report, and (iii) will prior to taking any adverse action based in whole or in part on the report, provide the consumer with a copy of the consumer report and a written description of the consumer's rights under the FCRA.

  • Obtain a certification that the user will not use the information from the consumer report in violation of any applicable Federal or State equal employment opportunity law or regulation.

  • Provide with the report, or have previously provided, a summary of the consumer's rights under the FCRA.

• In numerous instances, Defendants have sold consumer reports for employment purposes without obtaining the required certifications or providing a summary of the consumer's rights under the FCRA.

• Each instance in which Defendants have furnished a consumer report for employment purposes without complying with the requirements of Section 604(b) of the FCRA, 15 U.S.C. § 1681b(b), constitutes a separate violation for which Plaintiff may seek monetary penalties.

• FCRA Section 607(b), 15 U.S.C. § 1681e(b), requires CRAs to follow reasonable procedures to assure the maximum possible accuracy of consumer report information.

• As described above in Paragraphs 22-24 and 31-42, Defendants do not maintain reasonable procedures for assuring the maximum possible accuracy of information in Instant Checkmate or TruthFinder background reports.

• Each instance in which Defendants have furnished a consumer report without following reasonable procedures to assure the maximum possible accuracy of consumer report information as required by Section 607(b) of the FCRA, 15 U.S.C. § 1681e(b), constitutes a separate violation for which Plaintiff may seek monetary penalties.

Failure to Provide User Notice

• FCRA Section 607(d), 15 U.S.C. § 1681e(d), requires a CRA to provide a Notice to Users of Consumer Reports ("User Notice") to anyone who receives a consumer report from the CRA. As required by Section 607(d), the Consumer Financial Protection Bureau has prescribed the content of the User Notice through a model notice that is set forth in 12 C.F.R. § 1022, Appendix N. The User Notice provides users of consumer reports with important information regarding their legal obligations under the FCRA, including the obligation of the user to provide a notice to consumers who are the subject of an adverse action based in whole or in part on information contained in the consumer report.

• Defendants do not provide users of Defendants' background report services with the User Notice when they purchase reports.

• Each instance in which Defendants have furnished a consumer report without providing a User Notice as required by FCRA Section 607(d), 15 U.S.C. § 1681e(d), constitutes a separate violation for which Plaintiff may seek monetary penalties.

Failure to Conduct Reasonable Investigations of Consumer Disputes

• FCRA Section 611(a)(1)(A), 15 U.S.C. § 1681i(a)(1)(A), requires that, if the completeness or accuracy of any item of information contained in a consumer's file at a CRA is disputed by the consumer and the consumer notifies the agency directly, or indirectly through a reseller, of such dispute, the agency shall, free of charge, conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item from the file, before the end of the 30-day period beginning on the date on which the agency receives the notice of the dispute from the consumer or reseller.

• As described above in Paragraphs 31-42, Defendants fail to conduct reinvestigations of the completeness or accuracy of information contained within TruthFinder or Instant Checkmate reports upon receipt of a notice of dispute from the consumer.

• Each instance in which Defendants have failed to conduct a reasonable reinvestigation as required by FCRA Section 611(a)(1)(A), 15 U.S.C. § 1681i(a)(1)(A), constitutes a separate violation for which Plaintiff may seek monetary penalties.

• Based on the facts and violations of law alleged in this Complaint, Plaintiff has reason to believe that Defendants are violating or are about to violate laws enforced by the FTC because, among other things: Defendants have made the deceptive representations described in Paragraphs 20-47, and have continued to promote their services for employment and tenant screening without complying with the FCRA, as described in Paragraphs 48-86, at least until the commencement of the FTC's investigation.

COUNT I. DECEPTIVE STATEMENTS REGARDING ACCURACY

• Paragraphs 1 through 87 are incorporated as if set forth herein.

• In numerous instances in connection with the advertising, promotion, offering for sale, or sale of background reports, Defendants have represented, directly or indirectly, expressly or by implication, that their background reports are highly accurate or are "the most accurate information available to the public" and "the most accurate information available to civilians."

• The representations set forth were false or unsubstantiated at the time the representations were made.

• Therefore, the making of the representations constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT II. DECEPTIVE STATEMENTS REGARDING CRIMINAL AND ARREST RECORDS

• Paragraphs 1 through 87 are incorporated as if set forth herein.

• Defendants have represented to Instant Checkmate and TruthFinder users that searched-for individuals may have or have criminal or arrest records that users could view after purchasing an Instant Checkmate or TruthFinder subscription.

• In truth and in fact, in many instances, the searched-for individuals do not have criminal or arrest records, or they have only traffic violations. Defendants' representations to the contrary have been false or misleading.

• Therefore, the making of the representations constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT III. DECEPTIVE REMOVAL AND CORRECTION CLAIMS

• Paragraphs 1 through 87 are incorporated as if set forth herein.

• Defendants have represented directly or indirectly, expressly or by implication, that subscribers can correct inaccurate information contained in Defendants' background reports by clicking on the "remove" or "flag as inaccurate" buttons.

• In fact, subscribers cannot correct inaccurate information contained in Defendants' background reports by clicking "remove" or "flag as inaccurate," nor do Defendants inform other users that such information has been flagged or otherwise disputed.

• Therefore, the making of the representations constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT IV. FALSE CLAIM OF UNBIASED REVIEWS

• Paragraphs 1 through 87 are incorporated as if set forth herein.

• In connection with the advertising, promotion, offering for sale, or sale of background reports, Defendants have represented, directly or indirectly, expressly or by implication, that customer reviews of Instant Checkmate and TruthFinder reflect the opinions or experiences of ordinary unbiased customers.

• In truth and in fact, these customer reviews do not reflect the opinions or experiences of ordinary unbiased customers, but instead were written by individuals compensated with a free premium report credit.

• Therefore, the making of the representations was false or misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT V. FAILURE TO DISCLOSE MATERIAL CONNECTIONS

• Paragraphs 1 through 87 are incorporated as if set forth herein.
• In numerous instances in connection with the advertising, marketing, promotion, offering for sale, or sale of background reports, Defendants have represented, directly or indirectly, expressly or by implication, that customer reviews of Instant Checkmate and TruthFinder posted on the HighYa website reflected their customers' opinions or experiences.
• In numerous instances in which the Defendants made the representation set forth in Paragraph 105, Defendants failed to disclose, or disclose adequately, that some of those customers received compensation in the form of a free premium report credit to post those reviews on the HighYa website. This fact would be material to consumers in evaluating the reviews in connection with a purchase or use decision.
• Defendants' failure to disclose or disclose adequately the material information described in Paragraph 106, in light of the representation set forth in Paragraph 105, constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT VI. FCRA SECTION 607(a)

• Paragraphs 1 through 87 are incorporated as if set forth herein.
• As described in Paragraphs 69-73, Defendants failed to maintain reasonable procedures to require users to identify themselves, certify the purposes for which the information was sought, and certify that the information would be used for no other purposes; make a reasonable effort to verify the identity of a new prospective user and the uses for the consumer report certified by that prospective user before furnishing a consumer report; and limit the furnishing of consumer reports to the purposes permitted by FCRA Section 604, 15 U.S.C. § 1681b.
• By and through the acts and practices described in Paragraph 109, Defendants have violated Section 607(a) of the FCRA, 15 U.S.C. § 1681e(a).
• Pursuant to Section 621(a)(1) of the FCRA, 15 U.S.C. § 1681s(a)(1), the acts and practices alleged in Paragraph 109 also constitute unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT VII. FCRA SECTION 604(a)

• Paragraphs 1 through 87 are incorporated as if set forth herein.
• As described in Paragraphs 69-73, Defendants have furnished consumer reports, in the form of their background reports, to their subscribers without reason to believe those subscribers have permissible purposes to obtain such reports.
• By and through the acts and practices described in Paragraph 113, Defendants have violated Section 604(a) of the FCRA, 15 U.S.C. § 1681b(a).
• Pursuant to Section 621(a)(1) of the FCRA, 15 U.S.C. § 1681s(a)(1), the acts and practices alleged in Paragraph 113 also constitute unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT VIII. FCRA SECTION 607(b)

• Paragraphs 1 through 87 are incorporated as if set forth herein.
• As described in Paragraphs 22-42 and 78-80, in multiple instances, Defendants have failed to follow reasonable procedures to assure maximum possible accuracy of consumer report information.
• By and through the acts and practices described in Paragraph 117, Defendants have violated Section 607(b) of the FCRA, 15 U.S.C. § 1681e(b).
• Pursuant to Section 621(a)(1) of the FCRA, 15 U.S.C. § 1681s(a)(1), the acts and practices alleged in Paragraph 117 also constitute unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT IX. FCRA SECTION 604(b)

• Paragraphs 1 through 87 are incorporated as if set forth herein.
• In selling consumer reports for employment purposes, Defendants have not obtained the required certifications or provided a summary of the consumer's rights under the FCRA.
• By and through the acts and practices described in Paragraph 121, Defendants have violated Section 604(b) of the FCRA, 15 U.S.C. § 1681b(b)(1)(A) and (B).
• Pursuant to Section 621(a)(1) of the FCRA, 15 U.S.C. § 1681s(a)(1), the acts and practices alleged in Paragraph 121 also constitute unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT X. FCRA SECTION 607(d)

• Paragraphs 1 through 87 are incorporated as if set forth herein.
• As described in Paragraphs 81-83, Defendants do not provide users of Defendants' background report services with the User Notice when users purchase reports, as required by FCRA Section 607(d).
• By and through the acts and practices described in Paragraph 125, Defendants have violated Section 607(d) of the FCRA, 15 U.S.C. § 1681e(d).
• Pursuant to Section 621(a)(1) of the FCRA, 15 U.S.C. § 1681s(a)(1), the acts and practices alleged in Paragraph 125 also constitute unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT XI. FCRA SECTION 611(a)

• Paragraphs 1 through 87 are incorporated as if set forth herein.
• As described in Paragraphs 31-42 and 84-86, Defendants fail to conduct reinvestigations of the completeness or accuracy of information contained within TruthFinder or Instant Checkmate reports upon receipt of a notice of dispute from the consumer.
• By and through the acts and practices described in Paragraph 129, Defendants have violated Section 611(a)(1)(A) of the FCRA, 15 U.S.C. § 1681i(a)(1)(A).
• Pursuant to Section 621(a)(1) of the FCRA, 15 U.S.C. § 1681s(a)(1), the acts and practices alleged in Paragraph 129 also constitute unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

CONSUMER INJURY

• Consumers have suffered, and will continue to suffer, substantial injury as a result of Defendants' violations of the FTC Act and the FCRA. Absent injunctive relief by this Court, Defendants are likely to continue to injure consumers and harm the public interest.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff requests that the Court:

• Enter a permanent injunction to prevent future violations of the FTC Act and the FCRA by Defendants;
• Award monetary civil penalties against Defendants for each violation of the FCRA alleged in this Complaint; and
• Award such other and additional relief as the Court may determine to be just and proper.

Dated: September 11, 2023

Respectfully submitted,

FOR THE FEDERAL TRADE COMMISSION:
BENJAMIN WISEMAN
Associate Director
Division of Privacy and Identity Protection
TIFFANY GEORGE
Assistant Director
Division of Privacy and Identity Protection

/s/ Katherine E. McCarron
KATHERINE E. McCARRON (D.C. Bar No. 486335)
ROBIN L. WETHERILL (CA Bar No. 323912)
Attorneys
Division of Privacy and Identity Protection
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, DC 20580
(202) 326-2333 (McCarron)
(202) 326-2220 (Wetherill)

STIPULATED ORDER FOR PERMANENT INJUNCTION, CIVIL PENALTY JUDGMENT, AND OTHER RELIEF AS TO DEFENDANTS INSTANT CHECKMATE, LLC, TRUTHFINDER, LLC, THE CONTROL GROUP MEDIA COMPANY, LLC, INTELICARE DIRECT, LLC, AND PUBREC, LLC

Presently before the Court is the Joint Motion for Entry of Stipulated Order for Permanent Injunction, Monetary Judgment, and Other Relief (ECF No. 7, "Joint Mot.") filed by Plaintiff, the Federal Trade Commission (the "Commission" or "FTC"), and the Settling Defendants Instant Checkmate, LLC; TruthFinder, LLC; The Control Group Media Company, LLC; Intelicare Direct, LLC; and PubRec, LLC.

On September 11, 2023, the Commission filed its Complaint for Permanent Injunction, Other Equitable Relief, and Civil Penalties and Demand for Jury Trial (ECF No. 1, "Complaint") pursuant to Sections 13(b) and 16(a)(1) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 56(a)(1), and Section 621(a) of the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681s(a).

The Settling Defendants waived service of the Summons and the Complaint. Through counsel, the Commission and the Settling Defendants have stipulated to the entry of this Stipulated Order for Permanent Injunction, Civil Penalty Judgment, and Other Relief (the "Stipulated Order") to resolve all matters in dispute in this action between them.

Having reviewed the Parties' filings and pursuant to the Parties' Stipulation, the Court GRANTS the Joint Motion and ORDERS as follows:

FINDINGS

• This Court has jurisdiction over this matter.

• The Complaint charges that Defendants participated in deceptive and unfair acts or practices in violation of Section 5 of the FTC Act, 15 U.S.C. § 45, and in violation of the FCRA, 15 U.S.C. §§ 1681-1681x, in the promotion and sale of background reports.
• The Settling Defendants neither admit nor deny any of the allegations in the Complaint, except as specifically stated in this Stipulated Order. Only for purposes of this action, the Settling Defendants admit the facts necessary to establish jurisdiction.
• The Settling Defendants waive any claim that they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action through the date of this Stipulated Order, and agree to bear their own costs and attorneys' fees.
• The Settling Defendants and the Commission waive all rights to appeal or otherwise challenge or contest the validity of this Stipulated Order.

DEFINITIONS

For the purpose of this Stipulated Order, the following definitions apply:

• "Clearly and Conspicuously" means that a required disclosure is difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers, including in all of the following ways:

  • In any communication that is solely visual or solely audible, the disclosure must be made through the same means through which the communication is presented. In any communication made through both visual and audible means, such as a television advertisement, the disclosure must be presented simultaneously in both the visual and audible portions of the communication even if the representation requiring the disclosure is made in only one means.
  • A visual disclosure, by its size, contrast, location, the length of time it appears, and other characteristics, must stand out from any accompanying text or other visual elements so that it is easily noticed, read, and understood.
  • An audible disclosure, including by telephone or streaming video, must be delivered in a volume, speed, and cadence sufficient for ordinary consumers to easily hear and understand it.
  • In any communication using an interactive electronic medium, such as the Internet or software, the disclosure must be unavoidable.
  • The disclosure must use diction and syntax understandable to ordinary consumers and must appear in each language in which the representation that requires the disclosure appears.
  • The disclosure must comply with these requirements in each medium through which it is received, including all electronic devices and face-to-face communications.
  • The disclosure must not be contradicted or mitigated by, or inconsistent with, anything else in the communication.
  • When the representation or sales practice targets a specific audience, such as children, the elderly, or the terminally ill, "ordinary consumers" includes reasonable members of that group.

• "Close Proximity" means that the disclosure is very near the triggering representation. For example, a disclosure made through a hyperlink, pop-up, interstitial, or other similar technique is not in close proximity to the triggering representation.

• "Consumer Report" means any written, oral, or other communication of any information by a Consumer Reporting Agency bearing on a consumer's creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living, which is used or expected to be used or collected in whole or in part for a Permissible Purpose.

• "Consumer Reporting Agency" means any Person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing Consumer Reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing Consumer Reports.

• "Covered Record" means any written or oral communication that includes any of the following information from or about an individual consumer:

  • Sex offender status
  • Arrest records
  • Bankruptcy records
  • Liens
  • Eviction records
  • Civil and criminal court record information
  • Traffic tickets or citations

• "Covered Report" means any written, oral, or other communication of any information on consumers that is assembled or evaluated in whole or in part by any Person that bears on a consumer's creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.

• "Permissible Purpose" means:

  • In response to the order of a court having jurisdiction to issue such an order or a subpoena issued in connection with proceedings before a Federal grand jury; or
  • In accordance with the written instructions of the consumer to whom it relates; or
  • To a Person that the Consumer Reporting Agency has reason to believe:
    • Intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer;
    • Intends to use the information for employment purposes;
    • Intends to use the information in connection with the underwriting of insurance involving the consumer;
    • Intends to use the information in connection with a determination of the consumer's eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant's financial responsibility or status;
    • Intends to use the information, as a potential investor or servicer, or current insurer, in connection with a valuation of, or an assessment of the credit or prepayment risks associated with, an existing credit obligation;
    • Otherwise has a legitimate business need for the information:
      • In connection with a business transaction that is initiated by the consumer, including tenant screening; or
      • To review an account to determine whether the consumer continues to meet the terms of the account;
    • Executive departments and agencies in connection with the issuance of government-sponsored individually billed travel charge cards;
  • In response to a request by the head of a State or local child support enforcement agency (or a State or local government official authorized by the head of such an agency), if the Person making the request certifies to the Consumer Reporting Agency that:
    • The Consumer Report is needed for the purpose of establishing an individual's capacity to make child support payments, determining the appropriate level of such payments, or enforcing a child support order, award, agreement, or judgment;
    • The parentage of the consumer for the child to which the obligation relates has been established or acknowledged by the consumer in accordance with State laws under which the obligation arises (if required by those laws); and
    • The Consumer Report will be kept confidential, will be used solely for a purpose described in subparagraph 4(a) above, and will not be used in connection with any other civil, administrative, or criminal proceeding, or for any other purpose;
  • To an agency administering a State plan under Section 454 of the Social Security Act, 42 U.S.C. § 654, for use to set an initial or modified child support award;
  • To the Federal Deposit Insurance Corporation or the National Credit Union Administration as part of its preparation for its appointment or as part of its exercise of powers, as conservator, receiver, or liquidating agent for an insured depository institution or insured credit union under the Federal Deposit Insurance Act or the Federal Credit Union Act, or other applicable Federal or State law, or in connection with the resolution or liquidation of a failed or failing insured depository institution or insured credit union, as applicable.

• "Person" means any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity.

• "Settling Defendants" means Instant Checkmate, LLC, TruthFinder, LLC, The Control Group Media Company, LLC, Intelicare Direct, LLC, and PubRec, LLC, individually, collectively, or in any combination, and their successors and assigns.

• "Unexpected Material Connection" means any relationship that might materially affect the weight or credibility of a review or endorsement and that would not reasonably be expected by consumers.

ORDER

I. FAIR CREDIT REPORTING ACT MONITORING PROGRAM

IT IS ORDERED that the Settling Defendants must not advertise, market, promote, or offer for sale any Covered Report unless they first establish and implement, and thereafter maintain, a comprehensive monitoring program (hereinafter, the "Monitoring Program") to regularly review, assess, and determine the extent to which each Settling Defendant is operating in whole or in part as a Consumer Reporting Agency, and, if so, to regularly review, assess, and determine the extent to which the Settling Defendant is engaged in business activities prohibited by Section II of this Stipulated Order, entitled "Prohibited Business Activities." To satisfy this requirement, each Settling Defendant or the Settling Defendants together must, at a minimum:

• Document in writing the content, implementation, and maintenance of the Monitoring Program.
• Designate a qualified employee or employees to coordinate and be responsible for the Monitoring Program.
• Assess and document, prior to the inception of the Monitoring Program and at least once every twelve (12) months thereafter, the extent to which the Covered Reports promoted or offered for sale by the Settling Defendants are Consumer Reports, and the extent to which the Settling Defendants are acting as a Consumer Reporting Agency, including the extent to which users regularly use Covered Reports provided by the Settling Defendants for Permissible Purposes. This assessment shall include, at a minimum, a review of:
  • All products and services offered or sold.
  • Marketing and advertising materials used to promote, offer, or sell those products and services (including but not limited to any website content, advertisements, blog posts, testimonials, published statements, customer service scripts, search engine advertising keywords, push notifications, and any method or device used to direct Persons to a website).
  • Any measures to prevent users from using a Settling Defendant's products or services for Permissible Purposes (e.g., disclaimers, certifications, account terminations, user verification, or blocking) and available evidence or information relating to the effectiveness of those measures.
  • All users whom the Settling Defendants have reason to believe have used or intended to use one or more Covered Reports for a Permissible Purpose, all actions taken by the Settling Defendants to permanently prevent each such user from accessing Covered Reports, and the dates on which such actions were effective.
  • Any evidence of or information about how users of the Settling Defendants' products or services use, intend to use, or expect to use those products or services (including but not limited to consumer correspondence, consumer reviews, consumer complaints, and consumer testimonials).
• Design, implement, maintain, and document compliance with safeguards to assure that the Settling Defendants do not sell, offer, or make available Covered Reports for a Permissible Purpose, unless the requirements of this Stipulated Order that would apply to a Consumer Report are satisfied as to that product or service. These safeguards must include, at a minimum:
  • Training of all officers, employees, and advertising affiliates, and all agents and independent contractors to the extent that their job duties are relevant to the content of this Stipulated Order, at onboarding and at least every twelve (12) months thereafter, on this Stipulated Order's requirements, activities that would violate those requirements, and relevant specific job duties relating to compliance with this Stipulated Order.
  • Refraining from advertising, marketing, promoting, describing, or offering for sale any product or service that involves Covered Reports as suitable or appropriate for any Permissible Purpose, unless the requirements of this Stipulated Order that would apply to a Consumer Report are satisfied as to that product or service.
  • Reviewing, prior to their publication or implementation, all marketing and advertising materials used by the Settling Defendants to offer, promote, or sell those products and services (including but not limited to any advertisements, blog posts, testimonials, published statements, customer service scripts, search engine advertising keywords, push notifications, and any method or device used to direct Persons to a website).
  • Requiring affiliate marketing partners by contract to obtain prior written approval from the Settling Defendants for all unique advertising and marketing copy used to offer, promote, or sell Covered Reports.
  • Clearly and Conspicuously disclosing permissible and impermissible uses of any Covered Reports under this Stipulated Order.
  • Clearly and Conspicuously requiring each user, before the purchase of any product or service, prior to running any people search or background report search, and annually thereafter, to certify:
    • That the user will not use Covered Reports to make decisions about or in connection with hiring, promoting, reassigning, or continuing to employ any person, including current or potential volunteers and household employees such as childcare workers, contractors, or home health aides.
    • That the user will not use Covered Reports to make decisions about or in connection with renting or selling a house, apartment, or other residential property to any person.
    • That the user will not use Covered Reports to make decisions about or in connection with lending money or extending credit to any person.
    • That the user will not use Covered Reports in connection with the underwriting of insurance.
    • That the user will not use Covered Reports for any purpose related to any eligibility determination about a person.
  • Procedures to onboard users, including requiring users to agree to contracts or terms and conditions prohibiting the use of Covered Reports provided by the Settling Defendants for any Permissible Purpose and Clear and Conspicuous disclosure of such terms and conditions.
  • Implementing user access controls, such as controls on the number of Covered Reports obtained per day and investigation of accounts with excessive or suspicious patterns of obtaining Covered Reports.
  • Conducting ongoing reviews, tests, or audits of:
    • The ways that users use or expect to use the Settling Defendants' products or services.
    • The extent to which each Settling Defendant's officers, employees, agents, advertising affiliates, and independent contractors have implemented and are complying with the Monitoring Program.
    • The effectiveness of the Monitoring Program at detecting and preventing the use of Covered Reports for Permissible Purposes.
  • Implementing and complying with procedures to actively identify and investigate users who are using, have used, or likely intend to use Covered Reports for one or more Permissible Purposes and to permanently prevent those users from accessing Covered Reports within three (3) business days after a Settling Defendant becomes aware of the user's use of Covered Reports for a Permissible Purpose.
• Evaluate and adjust the Monitoring Program in light of any changes to a Settling Defendant's operations or business arrangements, or any other circumstance that the Settling Defendants know or have reason to know may materially affect the Monitoring Program's effectiveness. At a minimum, each Settling Defendant must evaluate the Monitoring Program every twelve (12) months and implement modifications based on the results.
• At least once every twelve (12) months, provide:
  • The written program required by Subsection I.A and any evaluations thereof or updates thereto.
  • The assessments and documentation required by Subsection I.C to the Settling Defendants' board of directors or governing body or, if no such board or equivalent governing body exists, to a senior officer responsible for regulatory compliance.

II. PROHIBITED BUSINESS ACTIVITIES

IT IS FURTHER ORDERED that the Settling Defendants; their officers, agents, employees; and all other Persons in active concert or participation with any of them, who receive actual notice of this Stipulated Order, whether acting directly or indirectly, in connection with operating as a Consumer Reporting Agency, are HEREBY PERMANENTLY RESTRAINED AND ENJOINED FROM:

• Failing to maintain reasonable procedures designed to limit the furnishing of Consumer Reports to Persons with Permissible Purposes to receive them. Such reasonable procedures shall require that:

  • Prospective users of the information identify themselves, certify the purposes for which the information is sought, and certify that the information will be used for no other purpose.
  • The Settling Defendants make a reasonable effort to verify the identity of a new prospective user and the uses certified by such prospective user prior to furnishing such user a Consumer Report.

• Failing to maintain reasonable procedures to assure the maximum possible accuracy of the information concerning the individual about whom the report relates.

• Failing to provide a FCRA notice to users of Consumer Reports (attached hereto as Attachment A to this Stipulated Order) to any person to whom a Consumer Report is provided by the Settling Defendants.

• In offering, selling, publishing, or making available Consumer Reports for employment purposes, failing to:

  • Obtain a certification that the user has complied with consumer notice requirements, including:
    • The user has provided a standalone written disclosure to the consumer that a Consumer Report may be obtained.
    • The user has obtained the written consent of the consumer to obtain a Consumer Report.
    • Prior to taking any adverse action based in whole or in part on the report, the user will provide the consumer with a copy of the Consumer Report and a written description of the consumer's rights under the FCRA (attached hereto as Attachment B to this Stipulated Order).
  • Obtain a certification that the user will not use the information from the Consumer Report in violation of any applicable Federal or State equal employment opportunity law or regulation.
  • Provide with the Consumer Report, unless it has been previously provided, a summary of the consumer's rights under the FCRA (attached hereto as Attachment B to this Stipulated Order).

• Furnishing a Consumer Report to any Person whom the Settling Defendants do not have reason to believe has a Permissible Purpose to receive the Consumer Report.

• Failing to conduct a reasonable reinvestigation, free of charge, if a consumer disputes the completeness or accuracy of any item of information contained in a Consumer Report about that consumer that is offered, sold, published, or made available by the Settling Defendants, and record the current status of the disputed information in, or delete the disputed information from, any Consumer Report that is offered, sold, published, or made available by the Settling Defendants before the end of the 30-day period beginning on the date on which the Settling Defendants receive notice of the dispute.

III. PROHIBITION AGAINST MISREPRESENTATIONS TO CONSUMERS REGARDING COVERED REPORTS

IT IS FURTHER ORDERED that the Settling Defendants; their officers, agents, employees; and all other Persons in active concert or participation with any of them, who receive actual notice of this Stipulated Order, whether acting directly or indirectly, in connection with advertising, marketing, promoting, or offering any product or service, are PERMANENTLY RESTRAINED AND ENJOINED from misrepresenting, expressly or by implication:

• The effect of utilizing any mechanism to remove or flag as inaccurate certain items of information in Covered Reports.
• The extent to which, or the probability that, any consumer has or may have Covered Records, the Settling Defendants have found Covered Records, or that there are possible or probable Covered Records.
• The accuracy or completeness of the information contained in the Covered Reports.
• That a traffic ticket or a traffic citation in a Covered Report is a criminal or arrest record.
• Any other fact concerning Covered Records or Covered Reports or any of the information therein, such as their accuracy, nature, characteristics, or content; or any restrictions, limitations, or conditions on users' ability to access, alter, use, correct, or delete them.

IV. INJUNCTION CONCERNING MISREPRESENTATIONS IN VIOLATION OF SECTION 5 OF THE FTC ACT

IT IS FURTHER ORDERED that the Settling Defendants; their officers, agents, employees, and attorneys; and all other persons in active concert or participation with any of them, who receive actual notice of this Stipulated Order, whether acting directly or indirectly, in connection with promoting or offering for sale any good or service are PERMANENTLY RESTRAINED AND ENJOINED from making, or assisting others in making, any misrepresentation, expressly or by implication, about:

• What a user can do or achieve with the product or service.
• The status of any person providing a review or endorsement of a good or service, including a misrepresentation that the reviewer or endorser is an unbiased or ordinary user of the good or service.

V. REQUIRED DISCLOSURES OF UNEXPECTED MATERIAL CONNECTIONS

IT IS FURTHER ORDERED that the Settling Defendants; their officers, agents, employees; and all other persons in active concert or participation with any of them, who receive actual notice of this Stipulated Order, whether acting directly or indirectly, in connection with promoting or offering for sale any Covered Report or related good or service, are PERMANENTLY RESTRAINED AND ENJOINED from making, or assisting others in making, any representation, expressly or by implication, about any reviewer or endorser of such good or service without disclosing, Clearly and Conspicuously, and in Close Proximity to that representation, any Unexpected Material Connection between such reviewer or endorser and:

• The Settling Defendants; or
• Any other individual or entity affiliated with the good or service.

VI. MONITORING OF ENDORSERS

IT IS FURTHER ORDERED that within ninety (90) days of the date of entry of this Stipulated Order, the Settling Defendants; their officers, agents, employees, and attorneys; and all other persons in active concert or participation with any of them, who receive actual notice of this Stipulated Order, whether acting directly or indirectly, in connection with promoting or offering for sale any Covered Report or related good or service, must take steps sufficient to ensure compliance with Subsection B of the Section of this Stipulated Order titled "Injunction Concerning Misrepresentations in Violation of Section 5 of the FTC Act" and the Section of this Stipulated Order titled "Required Disclosures of Unexpected Material Connections." Such steps shall include, at a minimum:

• Providing each reviewer or endorser of any Covered Report or related good or service with a clear statement of his or her responsibilities to disclose Clearly and Conspicuously and in Close Proximity to the endorsement, in any review, online video, social media posting, or other communication endorsing the good or service, the reviewer or endorser's Unexpected Material Connection to the Settling Defendants, or any other individual or entity affiliated with the good or service; and obtaining from each such reviewer or endorser a signed and dated statement acknowledging receipt of that statement and expressly agreeing to comply with it. For the purpose of this subsection, the term "signed" may include a verifiable electronic or digital form of signature, to the extent that such form of signature is recognized as a valid signature under applicable Federal law or State contract law.

• Establishing, implementing, and thereafter maintaining a system to monitor and review the representations and disclosures of reviewers and endorsers with any Unexpected Material Connection to the Settling Defendants, or any other individual or entity affiliated with the good or service to ensure compliance. The system shall include, at a minimum, monitoring and reviewing the endorsers' reviews, online videos, and social media postings.

• In the event an Unexpected Material Connection is not disclosed, contacting each reviewer or endorser to request such a disclosure. If such disclosure is not made or the review or endorsement is not removed, the Settling Defendants shall contact the platform on which the review or endorsement appears requesting its removal.

• Creating reports showing the results of the monitoring required by Subsections B and C of this Section.

VII. MONETARY JUDGMENT FOR CIVIL PENALTY

IT IS FURTHER ORDERED that:

• Judgment in the amount of $5,800,000 is entered in favor of the Commission against the Settling Defendants, jointly and severally, as a civil penalty.

• The Settling Defendants are ordered to pay to the Commission, by making payment to the Treasurer of the United States, $5,800,000, which, as the Settling Defendants stipulate, their undersigned counsel holds in escrow for no purpose other than payment to the Commission. Such payment must be made within seven (7) days of entry of this Stipulated Order by electronic fund transfer in accordance with instructions previously provided by a representative of the Commission.

VIII. ADDITIONAL MONETARY PROVISIONS

• The Settling Defendants relinquish dominion and all legal and equitable right, title, and interest in all assets transferred pursuant to this Stipulated Order and may not seek the return of any assets.

• The Settling Defendants acknowledge that their Taxpayer Identification Numbers (Social Security Numbers or Employer Identification Numbers), which the Settling Defendants must submit to the Commission, may be used for collecting and reporting on any delinquent amount arising out of this Stipulated Order, in accordance with 31 U.S.C. § 7701.

IX. COOPERATION

IT IS FURTHER ORDERED that the Settling Defendants must fully cooperate with representatives of the Commission in this case and in any investigation related to or associated with the transactions or the occurrences that are the subject of the Complaint. Such Settling Defendants must provide truthful and complete information, evidence, and testimony. Such Settling Defendants must:

• Cause the Defendants' officers, employees, representatives, or agents to appear for interviews, discovery, hearings, trials, and any other proceedings that a Commission representative may reasonably request upon five (5) days' written notice, or other reasonable notice.

• Appear at such places and times as a Commission representative may designate, without the service of a subpoena.

X. ORDER ACKNOWLEDGMENTS

IT IS FURTHER ORDERED that the Settling Defendants obtain acknowledgments of receipt of this Stipulated Order:

• Each Defendant, within seven (7) days of entry of this Stipulated Order, must submit to the Commission an acknowledgment of receipt of this Stipulated Order sworn under penalty of perjury.

• For fifteen (15) years after entry of this Stipulated Order, each Settling Defendant must deliver a copy of this Stipulated Order to:

  • All principals, officers, directors, and LLC managers and members.
  • All employees having managerial responsibilities for conduct related to the subject matter of the Stipulated Order and all agents and representatives who participate in conduct related to the subject matter of the Stipulated Order.
  • Any business entity resulting from any change in structure as set forth in the Section titled Compliance Reporting.

  Delivery must occur within seven (7) days of entry of this Stipulated Order for current personnel. For all others, delivery must occur before they assume their responsibilities.

• From each individual or entity to which a Settling Defendant delivered a copy of this Stipulated Order, that Defendant must obtain, within thirty (30) days, a signed and dated acknowledgment of receipt of this Stipulated Order.

XI. COMPLIANCE REPORTING

IT IS FURTHER ORDERED that the Settling Defendants make timely submissions to the Commission:

• One (1) year after entry of this Stipulated Order, each Settling Defendant must submit a compliance report, sworn under penalty of perjury:

  • Each Settling Defendant must:
    • Identify the primary physical, postal, and email address and telephone number, as designated points of contact, which representatives of the Commission may use to communicate with Defendant.
    • Identify all of that Defendant's businesses by all of their names; telephone numbers; and physical, postal, email, and Internet addresses.
    • Describe the activities of each business, including the goods and services offered, the means of advertising, marketing, and sales, and the involvement of any other Defendant.
    • Describe in detail whether and how that Defendant is in compliance with each Section of this Stipulated Order.
    • Provide a copy of each Order Acknowledgment obtained pursuant to this Stipulated Order, unless previously submitted to the Commission.

• For fifteen (15) years after entry of this Stipulated Order, each Settling Defendant must submit a compliance notice, sworn under penalty of perjury, within fourteen (14) days of any change in the following:

  • Each Settling Defendant must report any change in:
    • Any designated point of contact.
    • The structure of any Defendant or any entity that Defendant has any ownership interest in or controls directly or indirectly that may affect compliance obligations arising under this Stipulated Order, including creation, merger, sale, or dissolution of the entity or any subsidiary, parent, or affiliate that engages in any acts or practices subject to this Stipulated Order.

• Each Settling Defendant must submit to the Commission notice of the filing of any bankruptcy petition, insolvency proceeding, or similar proceeding by or against such Defendant within fourteen (14) days of its filing.

• Any submission to the Commission required by this Stipulated Order to be sworn under penalty of perjury must be true and accurate and comply with 28 U.S.C. § 1746, such as by concluding: "I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on: " and supplying the date, signatory's full name, title (if applicable), and signature.

• Unless otherwise directed by a Commission representative in writing, all submissions to the Commission pursuant to this Stipulated Order must be emailed to DEbrief@ftc.gov or sent by overnight courier (not the U.S. Postal Service) to:

  Associate Director for Enforcement,
  Bureau of Consumer Protection
  Federal Trade Commission
  600 Pennsylvania Avenue NW
  Washington, DC 20580.

  The subject line must begin: "Federal Trade Commission v. Instant Checkmate, LLC et al."

XII. RECORDKEEPING

IT IS FURTHER ORDERED that the Settling Defendants must create certain records for fifteen (15) years after entry of the Stipulated Order, and retain each such record for five (5) years. Specifically, the Settling Defendants must create and retain the following records:

• Accounting records showing the revenues from all goods or services sold.

• Personnel records showing, for each person providing services in relation to any aspect of this Stipulated Order, whether as an employee or otherwise:

  • The person’s name, addresses, telephone numbers, job title or position, dates of service, and (if applicable) the reason for termination.

• Records of all consumer complaints and refund requests related to the subject matter of this Stipulated Order, whether received directly or indirectly, such as through a third party, and any response.

• All unique sales or customer service scripts, form letters or emails, advertisements, or other marketing materials related to the subject matter of this Stipulated Order.

• All employee manuals and training materials related to the subject matter of this Stipulated Order.

• All records necessary to demonstrate full compliance with each provision of this Stipulated Order, including all submissions to the Commission.

XIII. COMPLIANCE MONITORING

IT IS FURTHER ORDERED that, for the purpose of monitoring the Settling Defendants' compliance with this Stipulated Order and any failure to transfer any assets as required by this Stipulated Order:

• Within fourteen (14) days of receipt of a written request from a representative of the Commission:

  • Each Settling Defendant must submit additional compliance reports or other requested information, which must be sworn under penalty of perjury.
  • Settling Defendants must appear for depositions and produce documents for inspection and copying.
  • The Commission is also authorized to obtain discovery, without further leave of the Court, using any of the procedures prescribed by Federal Rules of Civil Procedure 29, 30 (including telephonic depositions), 31, 33, 34, 36, 45, and 69.

• For matters concerning this Stipulated Order:

  • The Commission is authorized to communicate directly with each Settling Defendant.
  • The Settling Defendants must permit representatives of the Commission to interview any employee or other person affiliated with any Settling Defendant who has agreed to such an interview.
  • The person interviewed may have counsel present.

• The Commission may use all other lawful means, including:

  • Posing, through its representatives, as consumers, suppliers, or other individuals or entities to the Settling Defendants or any individual or entity affiliated with the Settling Defendants, without the necessity of identification or prior notice.
  • Nothing in this Stipulated Order limits the Commission's lawful use of compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49, 57b-1.

XIV. RETENTION OF JURISDICTION

IT IS FURTHER ORDERED that this Court retains jurisdiction of this matter for purposes of construction, modification, and enforcement of this Stipulated Order.

• In accordance with the Parties' Consent to Jurisdiction by a United States Magistrate Judge and Order of Reference (see ECF No. 16), the Honorable Michael S. Berg, United States Magistrate Judge, SHALL RETAIN continuing and exclusive jurisdiction over the Parties and all matters relating to the litigation and settlement agreement, including the administration, interpretation, construction, effectuation, enforcement, and consummation of the agreement and this Stipulated Order.

IT IS SO ORDERED.

Dated: October 11, 2023

Honorable Todd W. Robinson
United States District Judge