Landlords and Property Managers:
If you are a landlord or a property manager who wants to check credit report to evaluate rental applications can use tenant consumer reports as long as you follow the provisions of Fair Credit Reporting Act (FCRA). The FCRA is designed to assure privacy of consumer report and to guarantee that information provided by Consumer Reporting Agencies (CRA) are precise and accurate as possible. The FCRA requires landlords who deny a lease based on applicant's consumer report to provide the applicant with an "adverse action notice".
For more details, check the links below:
What is a Consumer Report?
A consumer report contains information about credit characteristics, character, general reputation, driving history,lifestyle and other personal records. Applicants are often asked to give references. Whether verifying such references is covered by the FCRA depends on who does the verification. A reference verified by the employer is not covered by the Act; a reference verified by CRA is covered.
Landlords often use consumer reports to help
them evaluate rental applications. These reports include:
- A report from a tenant-screening
service that describes the applicant's rental history.
- A credit report for the service obtained from a credit bureau;
- A report from a reference-checking
service that contacts previous landlords or other
parties on behalf of the rental property owner.
ask applicants to give personal, employment and previous
landlord references on their rental applications. Whether
verifying such references is covered by the FCRA depends on
who does the verification. A reference verified by the
landlord's employee is not covered by the Act; a reference
verified by an agency hired by the landlord to do the
verification is covered.
What is an Adverse
Any action taken by a landlord that is unfavorable to the
interests of a rental applicant is known as adverse action.
Some of the common actions are as follows
The Adverse Action
- Application denial;
- Request for a co-signer on
- Request a deposit that
would not be required for another applicant;
- Request a larger
deposit than might be required for another applicant; and
- Increse the rent amount than for another applicant.
When an adverse
action is taken that is based solely or partly on information
in a consumer report or tenant screening
report, the FCRA requires you to provide a notice of the
adverse action to the consumer. The notice must contain the following:
- Name, address and
telephone number of the CRA that supplied the consumer
report, including a toll-free telephone number(s) for CRAs that
maintain files nationwide;
- A statement that the CRA
that supplied the report did not make the decision to take
the adverse action and cannot give the specific reasons for
- A notice of the
individual's right to dispute the accuracy or completeness
of any information the CRA furnished, and the consumer's
right to a free report from the CRA upon request within 60
this information is very important because some consumer reports
action notice is required even if information in the consumer
report was not the main reason for denial or increase in
security deposit or rent or other adverse action. Please note even if the information in the report plays only a small part
in the overall decision, still the applicant must be
action notice must name the CRA that provided the report to
the landlord, even if the information came from another CRA.
For example, a report from XYZ TenantScreen includes a credit
report from ABC Credit Bureau. The credit report may include
negative information that may prompt the landlord to turn down
the rental application. The adverse action notice should name
XYZ TenantScreen as the CRA because XYZ TenantScreen actually
provided the report to the landlord. The notice also can
explain that XYZ TenantScreen got the credit information from
ABC Credit Bureau, but that is not required under the FCRA.
adverse action notices are allowed, written notices provide
proof of FCRA compliance.
Sample Tenant Adverse Action Letter
Summary of Your Rights Under the Fair Credit Reporting Act
Some Sample Scenarios:
1. A landlord who orders a consumer report from a CRA. Information contained in the report leads to further investigation of the applicant. The rental application is denied because of that investigation.
Since information in the report prompted the adverse action in this case, an adverse action notice must be sent to the consumer.
2. An applicant with an unfavorable credit history, like past-due credit accounts, who is denied an apartment. Although the credit history was considered in the decision, the applicant's poor reputation as a tenant in his current location played a more important role.
The applicant is entitled to an adverse action notice because the credit report played a part, however minor, in the denial.
3. A person with an unfavorable credit history, like a bankruptcy, but no other negative indicators, who applies for an apartment. Rather than deny the application, the landlord offers to rent the apartment, requiring a security deposit that is double the normal amount.
The applicant is entitled to an adverse action notice because the credit report influenced the landlord's decision to require a higher security deposit from the applicant.
Non-Compliance with the FCRA
Landlords who fail to provide required disclosure notices face legal consequences. The FCRA allows individuals to sue landlords for damages in federal court. A person who successfully sues is entitled to recover court costs and reasonable legal fees. The law also allows individuals to seek punitive damages for deliberate violations of the FCRA. In addition, the Federal Trade Commission (FTC), other federal agencies and the states may sue landlords for non-compliance and get civil penalties.
However, a landlord who inadvertently fails to provide a required notice in an isolated case has legal protections, so long as he or she can demonstrate "that at the time of the . . . violation he maintained reasonable procedures to assure compliance" with the FCRA.
For More Information
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(This article is presented as a public service.
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