The puppet masters of background checks

The puppet and the puppet master: who controls your confidential background checks data?

It’s not very often that I would intentionally attract attention to my competitors, but a recent development has prompted me to break with tradition because the subject merits full disclosure.

A client shared this link with me today. It’s a new website, sponsored by FRS Software, promoting 11 background screening companies as “leading providers” to compete for your business when your company issues an RFP.

Now I am not going to disparage any of the screening companies featured on this site because we do not build up our business by breaking down our competitors.

However, I am going to help educate readers about the difference between background screening companies that use a Third-Party Software platform like FRS Software and background screening companies that own and operate their own background screening software, like Precise Hire.

Third-Party Software providers like FRS Software own and operate the background screening software system that processes orders and stores data for numerous background screening companies nationwide.

There are many Third-Party Software providers that serve the background screening industry, including FRS, TazWorks, ClearStar, Deverus, BackChecked, Digital Delve and others.

Very few companies that use background checks in their hiring process know about these Third-Party Software providers because the end-user only sees the background screening company’s website, logo and colors. It’s structured this way to create the perception that the background screening company is processing the orders, accessing the data, storing the data and securing the data. But this is not the case.

Most Third-Party Software providers offer a reliable background screening platform with basic features and functionality. But they charge their clients – the background screening companies – a pretty steep service fee. Their fee covers hosting, customer service, invoicing, accounts receivable, data storage and many other services.

This fee typically ranges from $2,000 to $10,000 per month, depending on how many services are being provided. And if the background screening company wants to add customized features for its clients, then additional charges will be applied.

So what? This sounds like an innovative business model, you might be thinking.

Perhaps… but here’s the rub.

In order to be profitable, a background screening company that leases space and support services from a Third-Party Software provider must recover the monthly fees it pays to be hosted on one of these systems.

How do you think these fees are recovered?

Of course! These costs are built in to their prices.

If you do business with a background screening company that uses a Third-Party Software provider, you will be paying artificially inflated rates that are substantially higher than you could expect from a background screening company that owns and operates its own software system.

But price is not the only issue that may be cause for concern.

Precise Hire used to be hosted with some Third-Party Software providers in the early days. We bounced around from one to the next, always angling for a lower monthly service fee so we could pass on savings to our clients.

The problem was, each time we left a Third-Party Software provider, they would not permit us to keep the background checks data that our clients had entered when placing orders. They wouldn’t even let us purchase the data. This made us extremely uncomfortable and is one of the main reasons why we invested in developing our own software.

This is a problem because most companies (users) have no idea who possesses the confidential information of their applicants and employees. With so many recent stories about data breaches and the very real threat of identity theft, you really should have a business relationship with the company that controls your data.

Perhaps this practice has changed since we were hosting with the Third-Party Software providers, but background checks data has value and most companies are loathe to part with something of significant value.

Additionally, if there is ever a technological glitch with the background screening system, which may be causing a problem with orders or delaying reports, the background screening company is assuring their clients that a system fix is imminent, while pleading with the Third-Party Software provider to get the problem fixed. In other words, the background screening company has no direct control over the system. They can’t directly fix glitches, they can’t directly add customized features (without paying a steep fee that gets passed on to their clients), they can’t store data, they don’t secure any data and they can’t change data vendors to get better service at lower rates.

In other words, the background screening vendor – and the vendor’s clients – are at the mercy of the Third-Party Software provider, just like a puppet that is powerless until the puppet master pulling its strings.

Knowing this, I must credit FRS for creating the RFP website mentioned above. This is a nice little bonus to help drive more business to its screening company clients. It’s hard to say if they are charging their screening companies a fee for this service, but it seems like a nice gesture on its face.

That said, this does nothing for the end user, who pays inflated prices while being at the mercy of a company that they likley didn’t even know existed and that they have no contact with whatsoever.

In terms of transparency and accountability for data management, system performance and price, it’s a model that can be extremely disruptive and potentially harmful to the companies that unwittingly rely on such a system for their pre-employment background checks.

The RFP website mentioned at the top of this post claims that the featured screening companies offer:

Sophisticated web-based ordering and result viewing capabilities
Highly compliant Applicant Management Center
Integrations to your choice of HRIS or Applicant Tracking Systems

Actually, it’s the Third-Party Software provider (the puppet master) that offers these things to the background screening companies, who then pass it off as their own to the users.

At Precise Hire, we offer all of these things to our customers directly from our proprietary software that we own and operate.

This means our development team is responsible for all features and functionality. Our development team programs the HRIS and ATS integrations. Our development team troubleshoots and fixes any technological glitches. Our development team manages the data, which our clients always have access to.

Is your background screening vendor tied to a Third-Party Software provider? Have you ever talked with this company’s executives? How much do you know about them? If you have a contract with your background screening company, is their Third-Party Software provider listed in the contract for any accountability, financial stability or insurance purposes? You are using their software, after all. If not, why?

If your background screening vendor is tied to a Third-Party Software provider, price is just one factor to consider – but access, accountability and knowing who possesses and controls the confidential data of your applicants and employees is quite another. At the very least, you should know who is really controlling the strings on your background checks.
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