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Navigating End User Agreements

Not All End-User Contracts Are Created Equal

By Attorney Scott Paler, DeWitt LLP
For CRAs, the end-user contract can be an asset or liability.  When drafted well, the end-user contract can help to lower or manage risks in a variety of areas.  When drafted poorly, it can actually expose a CRA to a higher level of risk than having no contract at all.  All CRAs are well advised to work with counsel to freshen up their end-user contract every few years.  Below are a few areas to consider focusing upon.

  • Does the end-user contract disclaim any and all responsibility for report accuracy?

Some CRAs state in their end-user contract that they take no responsibility for the accuracy of their reports and that the end-user absolves them of any and all liability related to accuracy issues.  Although this language may have virtues on the surface, it misses the bigger picture.  Who is a CRA more likely to be sued by:  an end-user or a consumer?  Certainly, a consumer.  A consumer plaintiff can use poorly drafted “don’t hold me responsible for accuracy problems” language to support an argument that the CRA lacked reasonable procedures to ensure maximum possible accuracy or lacked strict procedures to ensure that records are complete and up-to-date. All CRAs ought to carefully vet accuracy-related language to ensure that it fortifies rather than weakens the CRAs’ positioning.

  • Does the end-user contract require the end-user to conduct a final investigation to ensure that the report bears upon the right person?

Some CRAs state in the end-user contract that the end-user bears ultimate responsibility for ensuring that the report information matches the consumer at issue.  Such language is designed to build a layer of protection for the CRA.  It is akin to saying:  “Don’t blame me, the CRA, if you, the end-user, take action against a consumer based on records that were falsely attributed to the consumer.  You could and should have done additional due diligence before making a final decision.”  In general, this type of language does more harm than good.  A CRA cannot delegate responsibility for ensuring accuracy to an end-user.  By suggesting otherwise in the end-user contract, the CRA is opening itself up to arguments that the CRA not only lacks reasonable procedures to ensure maximum possible accuracy, but indeed recklessly assigns final responsibility for matching to an end-user.  This is a recipe for increased exposure.

  • Does the end-user contract tackle sample disclosure and authorization forms and adverse action letters in a smart way?

Few documents generate more scrutiny in the screening space than disclosure and authorization forms and adverse action letters.  Although the vast majority of CRAs continue to provide clients with samples, only a minority have detailed, well-crafted end-user contract language explaining the CRA’s role as to such samples.  Many CRAs do not make clear that use of the forms/letters is voluntary, that the CRA is not providing legal advice, that the end-user should consult with counsel, and that the end-user will indemnify the CRA if the CRA is sued based upon the end-user’s use of the forms.  In today’s litigation environment, thoughtful language on this topic is critical.

  • Does the end-user contract reserve discretion for the CRA to determine what is legally reportable and to withhold records on that basis?

CRAs frequently have to make difficult judgment calls about what to report.  For example, should an 8-year-old adjudication withheld record be treated as a conviction or a non-conviction for reporting purposes?  Should a sexual assault record be reported when the CRA only has a name and date of birth match and the name in question is common?  Should a CRA report the full sex offender registry entry when the underlying conviction is 20 years old, the consumer is residing in a seven year conviction state, and the consumer was released from incarceration 10 years ago?  These can be difficult questions to answer.   To lower the chance that a CRA will be successfully sued by an unhappy end-user down the line for withholding valuable information, a CRA may wish to clarify in the end-user contract that it has full discretion to decide what is legally reportable within the search scope.

  • Does the end-user contract appropriately address adjudication and/or adverse action administration services?

Adjudication services and adverse action administration services carry material risk.  Among other things, they raise the risk that a CRA will be viewed as a joint employer and held partially responsible for the end-user’s decisions.  Too many CRAs omit any substantive discussion of these items in their end-user contract or, alternatively, deal with them only in cursory fashion.  CRAs ought to consider describing these services in more detail.  They may wish to explain that the CRA is only serving in and administrative role, that the end-user maintains all responsibility for decisions, that the end-user gives approval for the format of the adverse action letters, that the end-user will indemnify the CRA if the CRA is sued based upon its adjudication or adverse action role, etc.
NOTE:  This blog post is provided for general information purposes only.  It should not be construed as legal advice.  The best approach for a particular CRA depends on a number of different factors.  For legal advice, please contact your background screening attorney. 

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