Because, landlords and property rental companies perform credit checks on potential tenants on a fairly regular basis, it is important they adhere to the Fair Credit Reporting Act (FCRA) requirements. The FCRA as a law puts tight restrictions on the procurement and handling of tenant screening reports.
According to FCRA, landlords or rental companies are required to obtain a proviso or a written authorisation from each applicant before initiating a tenant screening report. This must be done for every tenant application, as your rental building address will be listed on each credit report, you pull. Before the Act took effect, if you used a screening agency to screen your tenants, the agency’s name was listed as the one initiating the tenant screening report. Since then, things have changed and now it is your property address that will appear on the credit report. This makes it important for you to get a disclaimer or authorisation from the applicant that gives you permission to conduct a credit check on him / her.
The importance of obtaining a disclaimer or authorisation from each applicant before asking for a tenant screening report cannot be emphasised. As well, always remember to keep the disclaimer / authorisation on file, even if the applicant has been rejected as a prospective tenant.
As long you adhere to FCRA rules, you should not face any problems, and for you to be in full legal compliance with the FCRA, your disclaimer should read as under:
“In compliance with state and federal laws, this is to inform you that a consumer investigation involving statements made on this application is being initiated. This investigation may involve obtaining information regarding your character, general reputation, credit, mode of living, and criminal background. You have the right to dispute the information reported. If this application is denied because of credit history, you may obtain a copy of your credit report from the credit reporting agency.
Landlord has my permission to release information found in screening for any lawful purpose associated with tenancy of premises. I authorize screening agency and landlord to obtain credit reports, character information, verification of rental history, employment history, bank information, public records, and personal reference as necessary to verify all information set forth in this application.”
As you will find, the FCRA also affects tenant screening, when the landlord or rental company takes adverse action i.e. rejects the applicant. Section 615 of the Act states when taking adverse action, the applicant must be provided with the following:
- Oral, written, or electronic notice of the adverse action.
- The name, address, and toll-free number of the consumer reporting agency responsible for providing the report, along with a statement stating the consumer reporting agency did not make the decision and cannot provide any specific reasons for the adverse action being taken
- A notice must be provided to the applicant that he / she has the right to obtain a free copy of their tenant screening report within 60-days, from the listed agency.
- The applicant must also be notified that he / she has the right to dispute the findings of the credit reporting agency, including the accuracy of any information contained in the credit report.
- The landlord has also to notify the applicant of the right to make a written request for information received from other sources other than the credit reporting agency within 60-days of adverse action being taken.
While issuing a denial letter, all of the above must be included to comply with the FCRA. Though, some of the FCRA requirements that affect tenant screening may seem unimportant, each one must be followed diligently to comply with the law and to avoid legal and punitive actions. Cutting corners will only find you liable for wilful or negligent non-compliance with the FCRA.
Therefore, while everyone landlord knows tenant screening is important in this day and age, the FCRA has been enacted to protect and promote accuracy, fairness, and the privacy of personal information assembled by Credit Reporting Agencies. There is protection both for Landlords and Tenants, just as it should be!