Tenant screening

Last updated

"'Tenant screening'" is used primarily by residential landlords and property managers to evaluate prospective tenants. The purpose is to assess the likelihood the tenant will fulfill the terms of the lease or rental agreement and will also take great care of the rental property in question. The process culminates in a decision as to whether to approve the applicant, approve the applicant conditionally (such as requiring an increased deposit or cosigner), or deny tenancy.

Contents

Tenant screening process

The tenant screening process typically begins when the prospective tenant (each adult applicant) completes a rental application and pays an application fee and perhaps a holding deposit.

Rental applications are designed to collect personally identifying information (name, social security number, date of birth, etc.), address, employment, criminal, and eviction history. In addition, a signature is generally required, attesting to the accuracy of information provided, agreeing to specific terms and conditions, and authorizing the procurement of a tenant screening report.

Valid government-issued photo identification is typically required to confirm the identity of applicants and in compliance with the Federal Trade Commission 's (F.T.C.'s) identity theft Red Flags Rule.

Most landlords rely on a tenant screening company to produce a tenant screening report - to compile relevant credit, [1] public records and other information needed to adequately vet prospective tenants. Information gleaned from the application, tenant screening report, and the landlord's research is used to arrive at a decision based on the landlord's rental criteria.

Applicant-initiated tenant screening services are beginning to emerge. Under this model, applicants order reports on themselves and grant access to prospective landlords.

Tenant screening companies

Tenant screening services are specialized consumer reporting agencies (C.R.A.s) or investigative consumer reporting agencies as defined and regulated by the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq.

C.R.A.s have many obligations under the FCRA. Notably, they must establish the identity of each end-user (landlord) and the purpose for which the information is sought - before providing a tenant screening report.

  • They must "follow reasonable procedures to assure maximum accuracy of the information concerning the individual to whom the report relates."
  • "Upon request, and subject to section 610(a)(1)of the FCRA (§ 1681h), clearly and accurately disclose to the consumer "all information in the consumer's file at the time of the request." Failure to do so can result in concrete regulatory action. See http://www.ftc.gov/opa/2010/02/saferent.shtm.
  • Additional C.R.A. compliance procedures are outlined in Section 607 of the FCRA (15 U.S.C. § 1681e).

Tenant screening reports

Tenant screening reports contain one or more of the following elements:

  • Consumer credit report (with or without a score) - from one of the three national credit bureaus (Experian, Equifax, or Transunion).
  • Eviction records search
  • Criminal records search
  • Sex offender registry search
  • Specially designated nationals search (frequently referred to as an OFAC search)
  • Rental references
  • Employment verifications
  • Recommendation - based on the landlord's criteria (parameters)

Credit reports and database searches are often returned instantly via secure websites. However, additional information resulting from more in-depth public records searches, rental references, and employment verifications can take anywhere from a few hours to a few days.

Landlord responsibilities

Landlords are Users of Consumer Reports, defined and regulated by the FCRA. The FCRA imposes specific requirements on landlords as Users. Notably, they must "…provide oral, written, or electronic notice of adverse action taken based in whole or in part on any information contained in a consumer (tenant screening] report. Adverse action is a determination that is adverse to the consumer's interest. Certainly, denial of tenancy is an adverse action. But so too is attaching additional terms, such as requiring an additional deposit or cosigner. The notification must include:

  • The name, address, and telephone number of the consumer reporting agency (tenant screening company] that furnished the report; and
  • The consumer's right to a free copy of the tenant screening report; and
  • The consumer's right to dispute the accuracy and completeness of the information.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) amended Section 615 of the FCRA to add a new requirement that a person (landlord) taking Adverse Action… "provide to the consumer written or electronic disclosure (A) of a numerical credit score as defined in section 609(f)(2)(A) [of the FCRA] used by such person in taking any Adverse Action based in whole or in part on any information in a consumer report; and (B) of the information outlined in subparagraphs (B) through (E) of section 609(f)(1)," including:

  • Numerical Score
  • Score Range
  • Score Factors
  • Score Date
  • Score Source

Tenant screening and the law

There is a substantial body of law regulating consumer reporting. The FCRA, 15 U.S.C. § 1681 et seq. as amended by the Fair and Accurate Credit Transactions Act of 2003 (FACTA) and more recently by Dodd-Frank is the primary body of law regulating consumer reporting. Many states have laws regulating consumer reporting as well. Section 625 of the FCRA (15 U.S.C. § 1681t) addresses the Relation (of the FCRA) to State laws by stating that "…this title does not annul, alter, affect, or exempt any person subject to the provisions of this title from complying with the laws of any State concerning the collection, distribution, or use of any information on consumer, …except to the extent that those laws are inconsistent with any provision of this title…". Federal law is said to pre-empt state law to the extent of any inconsistencies.

Dodd-Frank transferred regulatory authority over consumer reporting (and therefore tenant screening companies) from the Federal Trade Commission (F.T.C.) to the new Consumer Financial Protection Bureau in 2011.

Federal [2] and state [3] fair housing and residential landlord-tenant law impact the tenant screening process several ways. It is, in a nutshell, a violation of fair housing law to treat protected individuals differently in the tenant screening process. Fair housing law at the federal level is found in Title VIII of the Civil Rights Act of 1968. Residential landlord-tenant law often limits what landlords may charge for tenant screening to the actual costs of obtaining the background information, not to exceed the customary fees charged by a screening service in the general area.

Fair housing advocates have long argued for the application of the disparate impact legal theory (historically applied to employment practices) to Title VIII (Fair Housing Act) claims. [4] They argue, for example, that people of certain races and ethnicities are disproportionately represented in the criminal justice system, and that use of illegal record data for tenant screening purposes has a disparate impact on those individuals and is therefore discriminatory.

The debate was largely settled in 2015 when in the Texas Department of Housing and Community Affairs(The Department) v. The Inclusive Communities Project, Inc.(I.C.P.), the Supreme Court of the United States affirmed that a facially neutral business practice that has a disparate impact on a protected class could form the basis of a Fair Housing Act claim. The decision was based on the Housing & Urban Development (H.U.D.) regulation interpreting the Fair Housing Act's Discriminatory Effects Standard - including its burden-shifting framework for adjudicating such claims. [5]

Landlords have a right and obligation [6] to take reasonable steps to protect themselves, their residents and neighbors from prospective residents with a history of violent felonies (for example). Landlords can reduce their exposure to disparate impact claims by limiting consideration of criminal convictions (versus arrests) to offenses relevant to the tenancy that occur within a reasonable period.

Note section 605(2) of the FCRA prohibits C.R.A.'s from reporting records of arrest, civil suits, and civil judgments from the date of final disposition antedate the report by more than seven years. [7] Some states similarly limit reporting of criminal convictions - while there is no such limit in the FCRA.

Related Research Articles

<span class="mw-page-title-main">Lease</span> Contractual agreement in which an assets owner lets someone else use it in exchange for payment

A lease is a contractual arrangement calling for the user to pay the owner for the use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial or business equipment are also leased. Basically a lease agreement is a contract between two parties: the lessor and the lessee. The lessor is the legal owner of the asset, while the lessee obtains the right to use the asset in return for regular rental payments. The lessee also agrees to abide by various conditions regarding their use of the property or equipment. For example, a person leasing a car may agree to the condition that the car will only be used for personal use.

<span class="mw-page-title-main">Civil Rights Act of 1968</span> United States law

The Civil Rights Act of 1968 is a landmark law in the United States signed into law by United States President Lyndon B. Johnson during the King assassination riots.

<span class="mw-page-title-main">Fair Credit Reporting Act</span> U.S. federal legislation

The Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., is federal legislation enacted to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies. It was intended to shield consumers from the willful and/or negligent inclusion of erroneous data in their credit reports. To that end, the FCRA regulates the collection, dissemination, and use of consumer information, including consumer credit information. Together with the Fair Debt Collection Practices Act (FDCPA), the FCRA forms the foundation of consumer rights law in the United States. It was originally passed in 1970, and is enforced by the U.S. Federal Trade Commission, the Consumer Financial Protection Bureau, and private litigants.

A background check is a process a person or company uses to verify that an individual is who they claim to be, and this provides an opportunity to check and confirm the validity of someone's criminal record, education, employment history, and other activities from their past. The frequency, purpose, and legitimacy of background checks vary among countries, industries, and individuals. An employment background check typically takes place when someone applies for a job, but it can also happen at any time the employer deems necessary. A variety of methods are used to complete these checks including comprehensive database search and personal references.

Section 8 of the Housing Act of 1937, often called Section 8, as repeatedly amended, authorizes the payment of rental housing assistance to private landlords on behalf of low-income households in the United States. Fort Lauderdale, Florida Housing Authority Director William H. Lindsey, upon the advice of Housing Authority attorney J. Richard Smith, initially developed 11(b) financing in the early 1970s to accommodate a local savings and loan interested in assisting with urban renewal projects Lindsey eventually brought to fruition. This was the initial impetus for the subsequent development of the now well known Section 8 Program. 68% of total rental assistance in the United States goes to seniors, children, and those with disabilities. The U.S. Department of Housing and Urban Development manages Section 8 programs.

Property management is the operation, control, maintenance, and oversight of real estate and physical property. This can include residential, commercial, and land real estate. Management indicates the need for real estate to be cared for and monitored, with accountability for and attention to its useful life and condition. This is much akin to the role of management in any business.

A credit history is a record of a borrower's responsible repayment of debts. A credit report is a record of the borrower's credit history from a number of sources, including banks, credit card companies, collection agencies, and governments. A borrower's credit score is the result of a mathematical algorithm applied to a credit report and other sources of information to predict future delinquency.

Disparate impact in United States labor law refers to practices in employment, housing, and other areas that adversely affect one group of people of a protected characteristic more than another, even though rules applied by employers or landlords are formally neutral. Although the protected classes vary by statute, most federal civil rights laws consider race, color, religion, national origin, and sex to be protected characteristics, and some laws include disability status and other traits as well.

A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bureaus.

MIB Group, Inc. or MIB is a membership corporation owned by approximately 430 member insurance companies in the United States and Canada. Formed in 1902 and based in Braintree, Massachusetts, MIB provides services designed to protect insurers, policyholders, and applicants from attempts to conceal or omit information material to underwriting life & health insurance.

Landlord harassment is the willing creation, by a landlord or their agents, of conditions that are uncomfortable for one or more tenants in order to induce willing abandonment of a rental contract. This is illegal in many jurisdictions, either under general harassment laws or specific protections, as well as under the terms of rental contracts or tenancy agreements.

Consumer Affairs Victoria (CAV) is a government agency that protects and promotes the interests of consumers and is based in the Australian state of Victoria. It is responsible for reviewing and advising the Victorian Government on consumer legislation and industry codes; advising and educating consumers, tenants, traders and landlords on their rights, responsibilities and changes to the law; registering and licensing businesses and occupations; conciliating disputes between consumers and traders, tenants and landlords; and enforcing and ensuring compliance with consumer laws. It is a business unit of the Department of Justice and Community Safety.

<span class="mw-page-title-main">Landlord and Tenant Act 1985</span> United Kingdom legislation

The Landlord and Tenant Act 1985 is a UK Act of Parliament on English land law. It sets bare minimum standards in tenants' rights against their landlords.

Housing discrimination refers to patterns of discrimination that affect a person's ability to rent or buy housing. This disparate treatment of a person on the housing market can be based on group characteristics or on the place where a person lives.

The Red Flags Rule was created by the Federal Trade Commission (FTC), along with other government agencies such as the National Credit Union Administration (NCUA), to help prevent identity theft. The rule was passed in January 2008, and was to be in place by November 1, 2008, but due to push-backs by opposition, the FTC delayed enforcement until December 31, 2010.

Housing discrimination in the United States refers to the historical and current barriers, policies, and biases that prevent equitable access to housing. Housing discrimination became more pronounced after the abolition of slavery in 1865, typically as part of Jim Crow laws that enforced racial segregation. The federal government began to take action against these laws in 1917, when the Supreme Court struck down ordinances prohibiting blacks from occupying or owning buildings in majority-white neighborhoods in Buchanan v. Warley. However, the federal government as well as local governments continued to be directly responsible for housing discrimination through redlining and race-restricted covenants until the Civil Rights Act of 1968.

Discrimination in awarding Section 8 housing describes cases of discrimination in the housing market of the United States of America whereby landlords refuse to rent to tenants using housing vouchers. In the United States, "Section 8" is a portion of the Housing Act of 1937 that provides financial assistance for housing costs of several million low-income Americans.

The Housing Act 1988 is an Act of Parliament in the United Kingdom. It governs the law between landlords and tenants. The Act introduced the concepts of assured tenancy and assured shorthold tenancy. It also facilitated the transfer of council housing to not-for-profit housing associations, which was then carried out partly through the system of Large Scale Voluntary Transfer.

<span class="mw-page-title-main">Eviction in the United States</span> Landlord removals of rental housing tenants in the North American country

Eviction in the United States refers to the pattern of tenant removal by landlords in the United States. In an eviction process, landlords forcibly remove tenants from their place of residence and reclaim the property. Landlords may decide to evict tenants who have failed to pay rent, violated lease terms, or possess an expired lease. Landlords may also choose not to renew a tenant's lease, however, this does not constitute an eviction. In the United States, eviction procedures, landlord rights, and tenant protections vary by state and locality. Historically, the United States has seen changes in domestic eviction rates during periods of major socio-political and economic turmoil—including the Great Depression, the 2008 Recession, and the Covid-19 pandemic. High eviction rates are driven by affordable housing shortages and rising housing costs. Across the United States, low-income and disadvantaged neighborhoods have disproportionately higher eviction rates. Certain demographics—including low income renters, Black and Hispanic renters, women, and people with children—are also at a greater risk of eviction. Additionally, eviction filings remain on renters' public records. This can make it more difficult for renters to access future housing, since most landlords will not rent to a tenant with a history of eviction. Eviction and housing instability are also linked to many negative health and life outcomes, including homelessness, poverty, and poor mental and physical health.

Financial privacy laws regulate the manner in which financial institutions handle the nonpublic financial information of consumers. In the United States, financial privacy is regulated through laws enacted at the federal and state level. Federal regulations are primarily represented by the Bank Secrecy Act, Right to Financial Privacy Act, the Gramm-Leach-Bliley Act, and the Fair Credit Reporting Act. Provisions within other laws like the Credit and Debit Card Receipt Clarification Act of 2007 as well as the Electronic Funds Transfer Act also contribute to financial privacy in the United States. State regulations vary from state to state. While each state approaches financial privacy differently, they mostly draw from federal laws and provide more stringent outlines and definitions. Government agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission provide enforcement for financial privacy regulations.

References

  1. ↑ Shatus, Tracy. "The Importance of Credit History for Tenant Screening". Global Background Screening L.L.C. Retrieved 20 March 2020.
  2. ↑ , Fair Housing Laws and Presidential Orders.
  3. ↑ , Example: state fair housing law.
  4. ↑ , National Housing Law Project (NHLP) Lawsuit Guide.
  5. ↑ , Supreme Court and Fair Housing.
  6. ↑ "Jury finds housing authority negligent in woman's death - News 14". Archived from the original on 2012-05-14. Retrieved 2011-12-29., Charlotte Housing Authority Settlement.
  7. ↑ , Fair Credit Reporting Act.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.