Screening tenants? Check out the FTC’s new guidance

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Using background checks to screen tenants? Or maybe your company provides those background checks to landlords? Make sure you’re complying with the Fair Credit Reporting Act (FCRA). The FTC’s new guidance for landlords and for tenant background screening companies can help.

What do landlords need to know?

Landlords must take certain steps before getting a consumer report and after taking an adverse action based on the report. A consumer report can include a credit report, a rental history report or a criminal history report. Landlords can only get consumer reports if they have a “permissible purpose,” like tenant screening. Before you get a consumer report, you must certify to the company providing the report that you’ll use the report only for housing purposes.

If you, as a landlord, take an adverse action against a tenant or rental applicant, then you must give notice – orally, in writing or electronically. An adverse action could include denying a lease, requiring a co-signor, or requiring higher rent than for another applicant. The FTC’s guidance has more examples of when an adverse action notice is required. When you send an adverse action notice, it must include the contact information for the company who supplied the report and an explanation of the right to dispute the report.  

What should tenant background screening companies keep in mind?

Even if you don’t think of your company as a consumer reporting agency, it may be one if it provides information about people to landlords for use in housing decisions. Background screening reports provided by your company are covered by the FCRA if they’re used to help decide eligibility for housing and include information “bearing on a consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.”

If your tenant background screening company is covered by the FCRA, then you have four main requirements:

  • Follow reasonable procedures to ensure accuracy.
  • Get certifications from your clients.
  • Provide your clients with information about the FCRA.
  • Honor the rights of applicants and tenants.

The new guidance includes details about each of these requirements, as well as a handy chart of key FCRA provisions.

Whether you’re a landlord or a screening company, when you’re done using a consumer report, you must securely dispose of it. For more information, read Disposing of Consumer Report Information? Rule Tells How.

Share these resources – and the FTC’s Credit Reporting and Human Resources portals – with others in your company.

 

Comments

I think that any background checks be limited to only housing history, a landlord only needs to see if the tenant has paid rent and is a good tenant, a landlord or property owner does not need to know any other history of the tenant as housing discrimination can occur and does occur.

I have personally seen how too much information is not handled properly or the recipient of the information(landlord) does not have the experience to make a sound impartial judgement on the information provided.

Information used for screenings are too often used to discriminate, this is why we value our privacy from the masses.

I am the manager of a manufactured home community. We do employment (or we check "other" sources of income), credit, criminal and past rental residence screening. I've found it to be helpful in every realm, depending on the applicant. The final decision is based on the applicant not having felony convictions, having "decent" credit (550 or higher) and having an acceptable rental history. The reason for all of that is to be sure they 1. Pay their bills, and have income that shows that they can continue to do so. - We don't expect perfection, we just need to see EFFORT. 2. We will consider someone on a case by case basis IF they have felony convictions from a long time ago but they haven't been in trouble since UNLESS the conviction was a sex crime, drug trafficking or worse. And lastly, I am SO GLAD I call the past landlords!! This alone has saved me from having riff-raff here! We are a very quiet, close knit community, & there have been a few landlords who have told me that they "evicted" the tenant, but it did not go to court, so THERE WAS NO RECORD OF IT. The last guy told me that the tenant moved his entire family in his little place, was a partier and he was breeding what we consider to be "dangerous breed" dogs.
We advertise as a "crime free" community, so we have to have these guidelines in place.

"crime free" community - wow - that screams lawsuit to me when something happen to either the resident or their guest.

Screen your Land-Lord! he may very well be a Registered-Sex Offender.

No one can stop the landlord's means of discovery. Rules don't seem to apply. I want to buy a house. But because of the twenty five credit checks I have no credit. I never checked my credit. But loan officers did and they said I have no score. I thank you for the information. All seemed to coincide with my phone being hacked during the election.

We are a homeowners association in North Lauderdale, Broward County Fl.

We use consumer and investigation reports to determine eligibility of new unit owners and tenants.

Presently we do not comply with the FCRA , adverse action notices. Requirements. Nor have we ever disclosed our minimum standards for eligibility to prospective applicants.

Does this mean that we are in non compliance and may be subject to civil liability?

Please help.

The short answer is yes, you are totally out of compliance and may be subject to fines, penalties and lawsuits.. The way you posed your question indicates you are well aware of that. If you are obtaining your consumer reports from a Consumer Reporting Agency, then I suggest you look for a new company which does a better job of keeping you informed on your legal responsibilities.

Do you have link to the chart of FCRA provisions that you mentioned? Thanks.

If I want rent a one bed room apartment in NY queens landlord asked annual $ 60000.00 Income. This is totally unacceptable, if I have that much money I will bought a house.in future no one will not get a apartment .

Why do landlords put a red flag on your name it show up on public records but it doesn't show up on your rental report? But you have section 8

How far back can a tenant screening company report criminal records in the State of Illinois

What if you were denied because of credit? What do you do about it? Can anyone please help?

Rental agencies use all kinds of tactics to discrimate. Why go back 8 years and use that information to deny a potential applicant. All I see is out right discrimination.

I agree with John Holt. I have paid rent for the last decade and was never late, not once. The home was in my spouse name, and when we separated, I had a couple of negative things on my report, but not one negative rental account at all! never! I think it is a right for a property to know rental history, criminal history, and sex crimes. But there is NO reason, automobile, or credit cards, or other adverse history should be exposed to the property. First of all, many men with a few blemishes on their credit, are the providers in the family, taking care of not only their responsibilities, but of the kin folks, and others as well. In order to be accepted on the property, you had to score a 4.0, I scored a 3.5. It is just ridiculous that a person with perfect rental history, gets denied credit because some buy here pay here car lot has put a blemish on someones credit for 6 or 7 years, or some other bill, that has nothing to do with rental history. My elders told me, if you can not pay any other bill, pay your rent. Rent is the highest priority bill for most people, and these apartment communities are using these online screening companies who charge so much for their stupid algorithms that do not factor in real life instances, written by someone in another country, that are making millions off Americans. So really, apartments in tight market areas, should just say, we want well to do, perfect on paper tenants, and that is all we will except. Because if you have 5 people, and 4 have 800 scores and one has 560, who do you think the apartment will rent to? That is what i hate about the real estate business, when times are hard they cry like babies, and soon as it is good, they turn their nose up at poor people, looking to find a safe place to live.

I am a property owner that has hired a management company to manage my properties. I also hired them to find tenants for my properties. They conduct background and credit checks in accordance to the guidelines and laws. Once they find a prospective tenant that has passed the qualifications, they ask me for final approval. However, they will not share the background reports with me. They feel privacy laws prevent them from doing so. In my opinion, they've been hired to act as my agent to conduct business on my behalf. Therefore, I have a right to the information they collect necessary for me to make an informed decision.

Thoughts or comments?

I need advise please! I am fully disabled I have lived in a place for 16 years. But my daughter and I need a fresh start so I applied at an apartment complex everything looked great until they did a current landlord background check on me. The agency that rents to me I had a whole bunch of BS lies that they shared to this person. When my ex-husband lived in the home five years ago there was issues between him and management . But in the last five years they keep me one notice to get a new tag on my car other than that I’ve had no late payments no complaints. But when she gave her report she said I was late on rent all the time that she has to give me notices on the regular basis for cleaning up my yard or moving junk vehicles. None of which are true. So no the last two places we have a plied for we have been denied for because of this I guess my question Is what are my rights? How can I get a fresh start when I have somebody you slandering my name? Please help me if you can I would appreciate it

If the apartments you are applying for are calling your landlord directly, then the Fair Credit Reporting Act doesn't apply. You could check with your city or county to see if there are local laws that apply to your landlord's comments.

If the apartments you're applying for are using a third party company (meaning a consumer reporting agency) to check your  background, then the Fair Credit Reporting Act applies. The apartments are required to give you an adverse action notice that includes the name and contact information for the credit reporting agency that prepared the background report. You can get a free copy of the report from the credit reporting agency if you ask for it within 60 days of the adverse action, and you can dispute the inaccurate information with the credit reporting agency.

If the credit reporting agency doesn't resolve the dispute to your satisfaction, she can give them a statement for them to add to your file. You can also file a dispute with whoever gave the credit reporting agency that inaccurate information.

You may want to contact legal aid. Sometimes, legal aid lawyers can negotiate for tenants to get a “neutral reference” if the tenants  agree to move out within 60-90 or even 180 days.

You could also report a business to the FTC at FTC.gov/Complaint. The information you give goes into a secure database that the FTC and other law enforcement agencies use for investigations.

Potential landlord was supposed to run a background check and due to a delay of two weeks without the report we decided not to rent the unit. After backing out the landlord got the background check. Since we are being charged for it do we have the right to have a copy of it?

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