Written By ESR News Blog Editor Thomas Ahearn
The Federal Trade Commission (FTC) has issued new guidance for landlords who use background checks to screen tenants and for tenant background screening companies to help them comply with the federal Fair Credit Reporting Act (FCRA) which the FTC helps enforce.
This FTC guidance explains how landlords must take certain steps before getting a consumer report – which can include a credit report, a rental history report, or a criminal history report – and after taking an adverse action based on the report.
Landlords can only get consumer reports if they have a “permissible purpose,” like tenant screening. Before receiving a consumer report, landlords must certify to the company providing the report that they will use the report only for housing purposes.
If a landlord takes an adverse action against a tenant or rental applicant, they must give notice orally, in writing, or electronically. An adverse action could include denying a lease, requiring a co-signor, or requiring higher rent than for another applicant.
The FTC guidance has more examples of when an adverse action notice is required. When landlords send an adverse action notice, it must include the contact information for the company who supplied the report and an explanation of the right to dispute the report.
This FTC guidance explains that a company is a consumer reporting agency (CRA) covered by the FCRA if it provides information “bearing on a consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.”
Background screening reports provided by a CRA are covered by the FCRA if they are used by landlords in housing decisions such as helping to decide eligibility for housing. If a tenant background screening company is covered by the FCRA, they have four main requirements:
- Follow reasonable procedures to ensure accuracy.
- Get certifications from their clients.
- Provide their clients with information about the FCRA.
- Honor the rights of applicants and tenants.
The FTC guidance includes details about these requirements and a chart of key FCRA provisions. Both landlords and tenant background screening companies must also securely dispose of consumer reports: Disposing of Consumer Report Information? Rule Tells How.
Montserrat Miller – a background screening attorney at Arnall Golden Gregory LLP in Washington, DC who also writes the blog Workforce Compliance Insights – posted a short article about the new FTC guidance called Tenant Screening and the FCRA. Miller writes:
For background screening companies I encourage you to look at those responsibilities as described in the guidance carefully because the FTC opines on what “reasonable procedures to ensure accuracy” are and those should be read to apply to employment screening as well.
Miller concludes: Background screeners–notice that the FTC calls out reports with multiple entries for the same offense, the reporting of expunged or sealed records, reports with no dispositions, and finally, the failure to use a middle name to ensure accuracy.
More ESR News Blogs about the FTC
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