Error in criminal background check violates Fair Credit Reporting Act. (News & Trends).

The Fourth Circuit Court of Appeals has held that a credit reporting agency may have violated federal law when it erroneously informed a company that a prospective employee was a felon. (Dalton v. Capital Associated Indus., 257 F.3d 409 (4th Cir. 2001).)

The issue arose after Richard Dalton sought a job as a sales manager. He was offered the position pending the completion of several background checks, including one investigating whether he had a criminal record. The consumer reporting agency hired to conduct the criminal background check subcontracted this task to a research service, which erroneously reported that Dalton had been convicted of a felony. In fact, years earlier he had pleaded guilty to third-degree assault--a misdemeanor--after being charged with a felony. The company withdrew its job offer.

Dalton sued the agency, claiming that it violated the federal Fair Credit Reporting Act (FCRA), which governs all transactions with consumer reporting agencies. A federal district court dismissed his claim, finding that the agency used reasonable procedures to gather the necessary information and that its ultimate report to the prospective employer was accurate.

But the Fourth Circuit disagreed with both findings and reinstated the claim. It observed that when an employee of the research service contacted a court clerk's office for information on Dalton's record, the clerk read it from a computer database, then offered the erroneous opinion that third-degree assault is a felony under state law.

The court also said that the agency had no guidelines governing the sources a subcontractor could rely on in collecting information for a criminal background check.

The court cited FCRA case law holding that the issue of whether an agency used adequate procedures is a question for the jury in most cases. A reasonable jury could decide that it was unreasonable procedure to rely on a clerk's informal opinion regarding whether a specific crime is a felony, the court concluded.

As for the accuracy of the report, the final text relied on by the prospective employer contained the following record on Dalton: "Felony-Third degree assault-1/26/94-Guilty." The Fourth Circuit held that a reasonable jury could read this report as plainly indicating that Dalton was found guilty of a felony because the report gives no indication that he pleaded guilty to a lesser offense.

A new trial date in the case has not yet been set.