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Cult classic The Big Lebowski proves that mistaken identity can be entertaining on film. But for people looking to rent a house or apartment, it wasn’t so entertaining when tenant background reports about them provided by California company AppFolio included someone else’s convictions and evictions. An FTC settlement that includes a $4.25 million civil penalty reminds businesses like AppFolio of the Fair Credit Reporting Act’s requirement that they follow reasonable procedures to ensure the accuracy of information in their reports.

Consumer reporting agency AppFolio assembles and merges information obtained from other CRAs to create background screening reports, which it then sells to property managers. Given the harmful impact inaccuracies can have on consumers looking for a home, a job, or some other necessity, the Fair Credit Reporting Act requires that CRAs like AppFolio “shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” In addition, the law requires CRAs to exclude certain obsolete information.

But according to the FTC, before including criminal records, evictions, etc., in its background reports, AppFolio didn’t have procedures in place to adequately review the accuracy of the information it received from vendors. As a result, the complaint alleges that:

  • AppFolio failed to follow reasonable procedures to assess whether the identifiers in criminal records and eviction records in its reports reasonably matched the applicant;
  • AppFolio failed to follow reasonable procedures to assess whether there were internal inconsistencies in the identifiers or results indicating that the company was including information about multiple people in one report;
  • AppFolio failed to follow reasonable procedures to assure that criminal records and eviction records in its reports accurately reflected the disposition, offense name, and offense type; and
  • AppFolio failed to follow reasonable procedures to prevent the inclusion of multiple entries for the same criminal or eviction case in one report.

The FTC says those lapses had serious practical consequences. For example, AppFolio’s tenant background reports sometimes included information about other people with different names or dates of birth or misrepresented criminal or eviction records. The complaint also alleges that in violation of the FCRA, AppFolio included evictions and non-conviction criminal records that were more than seven years old.

In addition to the $4.25 million penalty, the proposed settlement requires AppFolio to maintain reasonable procedures to ensure the maximum possible accuracy of information in its reports. The order also prohibits the company from including non-conviction criminal or eviction records older than seven years.

The case suggests two other compliance takeaways for CRAs.

Caveat (re)venditor? Our Latin is atrocious, but the principle is sound. The FCRA’s requirement of “reasonable procedures to assure maximum possible accuracy” applies to companies that compile the information themselves and to resellers like AppFolio that put together reports based on data from vendors. It’s a risky – and illegal – practice simply to pass along what others have told you without an appropriate process for assessing the accuracy of the information. For more top-line tips, read What Tenant Background Screening Companies Need to Know About the Fair Credit Reporting Act.

Respond and reassess. The FTC says AppFolio received complaints disputing the accuracy of information in its reports, but didn’t change its practices to address those failures. It might not seem like it at the time, but consumer complaints can be an effective tool for paving potholes in your procedures. How would your company respond in similar circumstances?

In case you thought we wouldn’t close with a comparison between The Big Lebowski and the Fair Credit Reporting Act, think again. As Walter Sobchak said to a guy who crossed the lane’s foul line, “Smokey, this is bowling. There are rules.” To paraphrase Walter, “This is the FCRA. There are rules.” And the FTC expects companies to honor them.


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