Report: Faulty data hurting job seekers

WASHINGTON -- Thousands of U.S. job hunters are losing out because employers use faulty background-check data drawn from shoddy records, consumer advocates say in a new report.

Those advocates want the government to make sure people know what information prospective employers see, so that errors can be corrected and abusive companies can be held responsible.

Use of criminal-background data is exploding as the economy struggles back from the worst job crisis in decades, the National Consumer Law Center says in the report, which is being released Wednesday. To meet surging demand, countless dubious companies have sprouted up, it says.

"It's the Wild West for background-screening report companies," says Persis Yu, lead writer of the report. "They're generating billions in revenue, but they have little or no accountability."

Nearly three-fourths of companies conduct criminal background checks for some job applicants, according to a 2010 study by the Society for Human Resource Management. They buy criminal-background data from providers of all sizes, including national names like Lexis-Nexis as well as upstarts that could include "anyone with a computer, an Internet connection and access to records," the report says.

Data providers obtain information from online public records, private vendors, jails and police blotters, it says. Sloppy handling of that data can cause a search on one person to turn up a rap sheet about someone with a similar name, for example.

Other common errors include displaying criminal records that were supposed to be sealed or wiped clean, misclassifying minor offenses as major crimes and listing charges that have been dismissed, the report says.

The information is more widely available in part because local law-enforcement agencies are selling it to raise money, the group says. It says some data providers refuse to correct errors even when people can document inaccuracies.

That's not an option for many people, Yu said, because employers often ignore laws requiring them to let people correct any false, negative information before making a hiring decision.

"It's a source of confusion for many employers," she said, and the law is hard to enforce because it's impossible to know why a person's job application was rejected.

Further muddying the picture, data providers aren't registered with the government, so it's impossible to get a full picture of the industry, Yu said.

The report is the first in-depth survey of consumer abuse by private companies that sell dodgy dossiers. Many of the issues it explores were first described last year in an investigation by The Associated Press.

The Consumer Financial Protection Bureau has the authority to write rules governing data companies under the Fair Credit Reporting Act, the law governing credit-report companies, the report says. Advocates want the agency to make data providers update their records annually, prohibit matches based only on name and take other steps aimed at making them more accurate.

The CFPB has proposed adding credit-report companies to the list of companies it will supervise closely. It has not discussed regulating consumer-data providers.

NCLC also wants the Federal Trade Commission to investigate data providers and employers to make sure they are complying with FCRA.