Tenant Screening Adverse Action

Tenant Screening Adverse Action

What you need to do when denying a tenant.

Today’s the day – you get your tenant background check report results. You did your due diligence, you ordered a comprehensive consumer report package that included credit reports and criminal record reports, landlord and employment verifications; now it’s time to see if your prospective tenant meets the requirements that you have set. Upon examining the report, it hits you – they didn’t make the cut.

Landlords and tenant applicants alike dread the denial process. For landlords, denying a tenant not only means going back on the search for a qualified applicant, it also means fulfilling certain legal obligations toward the rejected applicant to notify them of their rights to see their consumer report and to correct any inaccurate information. These legal obligations are what the Fair Credit Reporting Act (FCRA) calls Adverse Action Notices.

An Adverse Action Notice is a kind of communication from a landlord to a current or prospective tenant of “adverse action” that the landlord will be taking as a result of something that was found on the tenant’s consumer report – that is, a report on an individual containing information about their credit, rental history, criminal history, or employment status obtained from a consumer reporting agency (CRA) such as AAA Credit Screening Services.

What qualifies as adverse action?

An adverse action is any action by a landlord that is unfavorable to the interests of a current or potential tenant applicant based off of information found in the applicant’s consumer report. While denying an unqualified tenant applicant is certainly a kind of adverse action, it is not the only type of adverse action that a landlord should give notice for. The following are some common adverse actions taken by landlords:

• Denying a tenant application
• Requiring a co-signer on te lease
• Requiring a larger deposit

All of these actions are considered "adverse" because they are not favorable to the tenant applicant.

What responsibilities does a landlord taking adverse action have?

If you are taking adverse action based partly or completely on information found in the applicant’s consumer report, you must notify the tenant applicant, even if the consumer report was not the main factor in the landlord’s decision. While oral adverse action notices are allowed, the Federal Trade Commission (FTC) recommends providing written or electronic notice; doing so will give the landlord a record of FCRA compliance.

From the FTC:

"The notice must include:"

• The name, address, and phone number of the consumer reporting company that supplied the report;
• A statement that the company that supplied the report did not make the decision to take the unfavorable action and can't give specific reasons for it; and
• Aa notice of the person's right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get a free report from the company if the person asks for it within 60 days.”

AAA Credit Screening makes adverse action notification simple for landlords. Simply navigate to the “results” page on your applicant’s report in the InstaScreen user interface and go to the “Disclosures and Forms” section. Select “Adverse Action Tenant Denial” from the drop-down list and click “View.” InstaScreen will auto populate a Tenant Adverse Action Letter with your information and your tenant’s information, a disclosure of rights under the FCRA, and the contact information to AAA Credit Screening Services, the consumer reporting company that supplied the report. From there, you only have to make minimal changes to the letter to fit your particular situation and comply with any additional state laws.

DISCLAIMER: This is an informational article and NOT legal advice. If you have questions about a specific problem or issue, please contact your attorney.

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