CFPB Action Against General Information Services Explained

The Consumer Financial Protection Bureau (CFPB) has repeatedly targeted companies that handle consumer credit and background information when they fail to follow federal consumer financial laws. General Information Services (GIS), a large background screening company, was one such target. Although the specific case materials are technical, the underlying themes are straightforward: accuracy, fairness, transparency, and accountability in background checks.

This article explains the enforcement action involving General Information Services in plain language, highlights the legal standards that applied, and outlines what both consumers and companies can learn from the case.

Background: The CFPB and Its Role in Enforcement

The CFPB is a U.S. government agency created to protect consumers in the financial marketplace. It oversees many federal consumer financial laws, including the Fair Credit Reporting Act (FCRA), which governs consumer reporting agencies and background check companies.

Congress gave the CFPB four main tools to carry out its mission:

• Rulemaking – writing regulations that interpret and implement federal consumer financial laws.
• Supervision – examining banks and certain nonbank companies to assess compliance.
• Enforcement – taking legal action when entities break the law.
• Education – helping consumers understand their rights and options.

When the CFPB believes a company has violated federal consumer financial law, it may investigate and, if warranted, pursue a public enforcement action in court or through an administrative proceeding.

Who Is General Information Services and Why Did It Matter?

General Information Services is a consumer reporting agency that compiles and sells background check reports, often to employers making hiring or promotion decisions. Companies like GIS play a powerful gatekeeping role: what they report can determine whether a person gets a job, keeps a job, or is denied an opportunity.

Under the FCRA, such companies must follow “reasonable procedures” to ensure maximum possible accuracy of the information they provide. When a background screener fails in that duty, the harms to consumers can be severe, including lost job offers, delayed hiring, and reputational damage.

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The Enforcement Path: How a Case Like GIS Reaches the CFPB

The CFPB typically follows a multi-stage process before announcing a public enforcement action. While each case is unique, the life cycle generally includes the following steps.

1. Identifying Potential Violations

CFPB enforcement teams look for signs of possible lawbreaking through various channels:

• Consumer complaints about inaccurate or unfair reports.
• Tips from whistleblowers or insiders.
• Referrals from other federal or state regulators.
• Information uncovered in supervisory exams of financial institutions.
• Market intelligence, such as news reports or litigation records.

To open an investigation, the Bureau generally considers whether:

• There is a plausible set of facts that could amount to a legal violation.
• Specific entities appear to be responsible for the conduct.
• The potential consumer harm justifies using agency resources.
• Investigating aligns with the Bureau’s strategic priorities.

2. Fact Gathering and Civil Investigative Demands

Once an investigation begins, the CFPB can gather facts using a variety of tools. Its primary compulsory tool is the civil investigative demand (CID), a type of investigative subpoena authorized by the Consumer Financial Protection Act.

A CID can require a company to provide:

• Documents, records, and data files.
• Emails and internal communications.
• Written responses to questions.
• Oral testimony under oath.

Each CID must specify the nature of the suspected conduct and the laws at issue in a section called the “notification of purpose.” Recipients can petition the CFPB’s Director to modify or set aside a CID, and if necessary, the Bureau can go to federal court to enforce it.

3. Deciding Whether to Bring a Public Enforcement Action

After reviewing evidence, the CFPB can:

• Seek authorization from the Director to file a public enforcement action.
• Close the investigation without public action.
• Refer the matter to the Bureau’s supervisory office to address the issues through exams and corrective plans rather than litigation.

If the Director authorizes enforcement, the CFPB may file a case in federal or state court or initiate an administrative adjudication before an administrative law judge. The judge issues a recommended decision, and the CFPB Director ultimately enters a final decision that may adopt or modify those findings.

Core Legal Issues in the GIS Case

Although the precise case filings against General Information Services are lengthy, they revolve around recurring themes in background check enforcement:

• Accuracy of information in consumer reports.
• Timely correction of disputed information.
• Clear disclosures to employers and consumers.
• Proper use of criminal and public record data in employment screening.

Accuracy Duties Under the Fair Credit Reporting Act

The FCRA requires consumer reporting agencies to maintain reasonable procedures to ensure the maximum possible accuracy of information in consumer reports used for employment, credit, and other purposes. For a company like GIS, this often includes:

• Using reliable and current public record sources.
• Avoiding mismatches between people with similar names or identifiers.
• Updating records to reflect dismissals, expungements, or corrections.
• Ensuring that obsolete or prohibited information is not reported.

When these processes break down, consumers can be wrongly labeled as having criminal records or negative histories they do not actually have. In prior cases, the CFPB has alleged that background screeners reported inaccurate or outdated information and did not have adequate systems to prevent such errors.

Handling Disputes and Corrections

Another recurring enforcement focus is how consumer reporting agencies respond when people dispute information in their reports. Under federal law, they must:

• Investigate disputes promptly and reasonably.
• Correct or delete inaccurate or unverifiable information.
• Provide updated results to the consumer and, in employment cases, to employers who obtained the report.

Failure to handle disputes adequately can prolong the harm caused by an error and may itself be a violation of law.

Remedies and Outcomes in CFPB Enforcement Actions

In actions against consumer reporting and background check companies, the CFPB typically seeks a combination of monetary and non-monetary relief. While each case is tailored to the facts, the toolbox is relatively consistent across actions.

The CFPB emphasizes consumer redress as a top priority and may also use its civil penalty fund to provide payments to harmed consumers when money cannot be directly collected from violators.

Key Lessons for Background Screening Companies

The enforcement history involving General Information Services and similar firms offers guidance to the entire background screening industry. Several themes stand out.

1. Invest in Robust Accuracy Controls

Accuracy is central to FCRA compliance. Companies handling background checks should prioritize:

• Matching algorithms that use multiple identifiers, not just names.
• Regular audits of data vendors and court record sources.
• Automated flags for outdated, sealed, or expunged records.
• Quality assurance reviews before sending reports to employers.

Errors that persist across many reports, or that disproportionately affect vulnerable populations, are likely to draw regulator attention.

2. Treat Disputes as High-Risk Events

Consumer disputes are both a legal obligation and an early warning system. To reduce enforcement risk, agencies should:

• Provide clear, accessible channels for consumers to submit disputes.
• Investigate thoroughly, not simply confirm data with the same source that may be wrong.
• Track dispute outcomes to identify patterns of recurring errors.
• Notify employers promptly when corrections change the substance of a report.

3. Ensure Transparent Communications with Employers and Consumers

Background screeners must also pay attention to how they communicate with their clients and the individuals being screened. Best practices include:

• Clear descriptions of what a report includes and its limitations.
• Guidance to employers on their own obligations under the FCRA, such as pre-adverse and adverse action notices.
• Easy-to-understand consumer disclosures and summaries of rights.

A lack of transparency can lead to employers misusing reports or consumers misunderstanding their rights, both of which can heighten legal exposure.

4. Coordinate Compliance with Evolving CFPB Priorities

The CFPB’s broader enforcement record shows a focus on repeat offenders, large-scale consumer harm, and firms that exploit information asymmetries or use unfair digital practices. Background screeners should monitor CFPB guidance, advisory opinions, and prior consent orders to understand where scrutiny is increasing, including:

• Use of automated decision-making and algorithms in screening.
• Digital interfaces that may confuse consumers or discourage disputes.
• Bulk data purchases from high-risk sources.

What Consumers Can Learn from the GIS Case

Consumers affected by inaccurate background checks often feel powerless, but federal law provides tools to protect them. The CFPB’s enforcement work, including cases like the one involving GIS, underscores the importance of using these rights.

Know Your Rights Around Background Checks

Under federal law, if a background check is used for employment, you generally have the right to:

• Receive a notice from the employer that a consumer report may be used.
• Provide written authorization before the report is obtained.
• Receive a copy of the report and a summary of rights if the employer intends to take adverse action based on it.
• Dispute inaccurate or incomplete information with the consumer reporting agency.

The CFPB and the Federal Trade Commission publish educational materials that explain these rights and how to exercise them.

Act Quickly if You Suspect an Error

If you are denied a job or opportunity due to a background check you believe is inaccurate:

• Ask the employer which company provided the report.
• Request a copy of the report from the company, if one is not already provided.
• Submit a written dispute that clearly identifies the disputed items and provides any supporting documents.
• Keep records of all communications, including dates and copies of correspondence.

Filing a complaint with the CFPB can also help the agency identify patterns of misconduct and may contribute to future investigations.

Compliance Takeaways for Employers Using Background Checks

Although the GIS enforcement case directly targeted the reporting company, employers that purchase and use background checks also bear legal responsibilities. Employers should:

• Work only with reputable background screening vendors that have robust compliance programs.
• Provide required disclosures and obtain written consent before requesting a report.
• Follow the pre-adverse and adverse action process when considering negative information from a report.
• Allow applicants a reasonable opportunity to dispute or explain negative items.

Failure to follow these steps can expose employers to lawsuits and regulatory risk, independent of any issues at the screening company.

Frequently Asked Questions (FAQs)

Q1: What did the CFPB allege against General Information Services?

The CFPB’s public documents and similar cases suggest that the core allegations involved failures to ensure accurate background information, inadequate procedures around public records, and related violations of consumer reporting laws. The overarching concern was that inaccurate or improperly reported data could unfairly harm consumers in employment decisions.

Q2: How does the CFPB decide when to bring an enforcement case?

The Bureau evaluates whether there are plausible facts showing a potential violation, whether specific entities appear responsible, the scale and seriousness of consumer harm, and whether an investigation fits within its strategic priorities. If sufficient evidence is found, enforcement staff may seek authorization from the CFPB Director to file a case.

Q3: Can a company challenge a CFPB investigation?

Yes. For example, when a company receives a civil investigative demand, it can petition the CFPB’s Director to modify or set aside the demand. If the Bureau seeks to enforce a CID in court, the company can raise legal arguments there as well.

Q4: Are enforcement actions only about money?

No. While monetary redress and penalties are central, the CFPB also seeks non-monetary relief, such as orders to improve compliance systems, restrictions on certain conduct, and in serious cases, bans on participating in specific markets.

Q5: Where can I see other CFPB enforcement actions?

The CFPB maintains an online database of public enforcement actions with case documents, summaries, and related materials. This transparency allows consumers, companies, and researchers to see how the law is being enforced over time.

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Author

medha deb

 

Medha Deb is an editor with a master's degree in Applied Linguistics from the University of Hyderabad. She believes that her qualification has helped her develop a deep understanding of language and its application in various contexts.

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