November 5, 1998
Nancy S. Spritz, Esq.
Candle, Klitenic & Chernow, LLP
Woodholme Professional Building
1838 Greene Tree Road, Suite 370
Baltimore, Maryland 21208
Re: Section 603(k)(1)(B)(iv) of the Fair Credit Reporting Act --Adverse Action Notices to Co-Signers / Guarantors of Denied Rental Applications
Dear Ms. Spritz:
This letter responds to your letter asking for the staff's opinion as to whether Section 615(a) of the Fair Credit Reporting Act ("FCRA") requires a landlord to provide notice of an adverse action to a co-signer/guarantor of a rental application when the landlord denies the prospective tenant's application based in whole or in part on information in the co-signer/guarantor's consumer report. Your letter suggests that the landlord should not be required to provide an adverse action notice to the co-signer/guarantor because the denial is only adverse to the primary applicant's interest.
We disagree. Section 603(k)(1)(B)(iv) of the FCRA defines "adverse action" to mean "an action taken or determination that is (I) made in connection with an application that was made by . . . any consumer . . . and (II) adverse to the interests of the consumer." (Emphasis added.) A denial of a co-applicant's rental application is clearly adverse to the interests of the co-applicant. In the context of a transaction involving a consumer who is a co-signer or a guarantor of another consumer's rental application, the primary applicant and the co-signer/guarantor may be equally liable. In the event of the primary applicant's default, a co-signer/guarantor may step into the shoes of the primary applicant, assuming personal liability for the default. This constitutes a substantial and, in fact, legally recognized "interest" in the rental transaction. The rejection is "adverse" to that interest because, by voluntarily assuming that liability, the co-signer/guarantor seeks to ensure that the primary applicant receives housing, as in the case of a parent who co-signs a rental application submitted by a son or daughter.
The views set forth in this informal opinion letter are not binding on the Commission.
Jonathan A. Smollen