On November 15th, the Consumer Financial Protection Bureau (CFPB) issued two separate reports on tenant background checks and their wide-spread use by the rental housing industry.  In addition to questioning to what extent these reports actually aid landlords to mitigate risk, the CFPB found other areas that need amelioration, including with the manner in which the multi-family industry operates today.

As someone who has been involved with the apartment industry for three decades, it is not surprising.  The multi-housing industry has too often been predisposed to wanting fast, low-cost tenant screening reports, or in the politically correct vernacular of this industry, resident screening reports.

Today, there is a proliferation of publicly traded and other large corporate entities that are acquiring massive numbers of rental units, and this trend is increasing.  It should not be shocking that these real estate companies are especially concerned with profit margins, occupancy rates and getting vacant rentals leased promptly.

Some of the findings of these CFPB reports include:

  • As corporate landlords have become more prevalent, the demand for fast or instant electronic scoring models has risen.
  • Rental applicants typically pay an Application Fee to cover the cost of the background check, but normally do not see their reports.
  • Adverse Action Notices are often not provided by landlords to their rental applicants.

The multi-housing industry should consider the following and always ensure they are following the Fair Credit Reporting Act (FCRA), and the requirements it places on them as landlords:

  • Fast or instant in not always possible. Criminal records and eviction records typically have no social security number (SSN).  When possible “hits” or records exist, they need to be reviewed and verified before they can be reported to the landlord.
  • Applicants are entitled to a copy of their background check report.
  • If any adverse action is taken against a rental applicant, the landlord is required to send an Adverse Action Notice to the consumer. The reason(s) for the adverse action must be provided, along with the contact information of the consumer reporting agency, and the FCRA Summary of Consumer Rights.

Apartment owners and property management companies needing assistance with complying with the FCRA should seek out a reliable background screening company that is also a consumer reporting agency.

Posted by: Rudy Troisi, L.P.I., President and CEO, Reliable Background Screening

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