March 17, 1999
Clarine Nardi Riddle, Esq.
National Multi Housing Council
1850 M Street NW
Washington, D.C. 20036
Re: Section 615(b)(1) of the Fair Credit Reporting Act
Dear Ms. Riddle:
This is in response to your letter requesting the staff's views on the extent to which Section 615(b)(1) of the amended Fair Credit Reporting Act (FCRA) applies to the situation where an owner/manager of residential property takes an adverse action -- i.e., refuses to rent or lease a dwelling -- based on information obtained from the applicant's previous landlord. For the reasons set forth below, we believe that Section 615(b)(1) does not apply to landlords in this situation.
Before setting forth our views on this issue, it is important to note that, as a result of the 1996 amendments to the FCRA, landlords now have obligations under Section 615(a) the FCRA when they take adverse actions based on credit reports or other types of consumer reports (such as reports from tenant screening organizations). Prior to the 1996 amendments, the Commission took the position in its Commentary on the FCRA that the landlord-tenant relationship did not involve "credit" and was, therefore, not covered by the adverse action notice procedures set out in Section 615 of the FCRA.(1) (At the time, Section 615 required adverse action notices only in connection with "credit," "insurance," or "employment" transactions.) In the 1996 amendments, Congress changed that result by adding a broad definition of the term "adverse action" in Section 603(k) of the FCRA.
"Adverse action" is now defined broadly in Section 603(k) of the FCRA to cover adverse actions in credit (including the denial of credit or the termination of an account), employment (including the denial of employment), licenses or benefits from a governmental entity (including denial or cancellation), and insurance (including the denial of coverage). In addition, Congress added a broad "catch-all" in Section 603(k)(1)(B)(iv), which covers, inter alia, all actions or determinations "adverse to the interests of the consumer" made in connection with an application made by, or a transaction initiated by, the consumer. The catch-all provision clearly covers the landlord-tenant situation. Thus, landlords who use consumer reports must now provide applicants Section 615(a) adverse action notices when they refuse to rent or lease a dwelling, or require an increased security deposit as a precondition to the rental, based on a consumer report.
However, the issue you raise is a different one: whether landlords now have any obligations under another portion of Section 615 -- sub-section (b)(1). This sub-section requires notice "[w]henever credit for personal, family, or household purposes ... is denied or the charge for such credit is increased . . . because of information obtained from a person other than a consumer reporting agency bearing upon a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living" (emphasis added). The notice required by this provision is not triggered by an "adverse action" as defined in Section 603(k), but has a more limited trigger -- the denial of (or increased charge for) "credit."
As you can see, Congress did not amend Section 615(b)(1) to refer to the newly added "adverse action" definition as the trigger for requiring a notice under this sub-section, and we have found nothing in the legislative history of the 1996 amendments that indicates Congress intended to change the Commission's determination that the landlord-tenant relationship is not generally a "credit" relationship. It appears that Congress was concerned in the relevant 1996 amendments with the situation where landlords use consumer reports as a basis for adverse actions, and that it addressed this issue by adding a fairly broad definition of "adverse action" to the statute and by referencing this definition in Section 615(a).
Accordingly, it is our view that the Commission's position in the Commentary that the landlord-tenant relationship is not a "credit" relationship remains in force. As a result, we believe that landlords have no obligations under Section 615(b)(1) to provide notices when they base an adverse landlord-tenant decision upon information obtained from persons other than consumer reporting agencies, such as information from an applicant's previous landlord. Such a decision does not constitute a denial of, or an increase in the charge for, "credit" under Section 615(b)(1).
I hope that this information is helpful for you. The opinions set forth in this informal staff letter are not binding on the Commission. If you have any further questions, please feel free to contact me.
Division of Financial Practices
1. 16 C.F.R. §600 Appendix, 55 Fed. Reg. 18804, 18826 (May 4, 1990), comment 615-10.