Written By Digital Content Editor Thomas Ahearn

On November 15, 2022, the Consumer Financial Protection Bureau (CFPB) issued two reports on the tenant background check industry that “describe how errors in these background checks contribute to higher costs and barriers to quality rental housing,” according to a news release from the CFPB.

The two reports – “Tenant Background Checks Market Report” and “Consumer Snapshot: Tenant Background Checks” – contain the CFPB’s analysis of more than 24,000 complaints highlighting the industry’s failure to remove wrong, old, or misleading information and provide adequate investigations of disputed information.

Both reports reveal that people are denied rental housing because negative information is reported that belongs to someone else, outdated information remains on reports, and inaccurate details about arrests, criminal records, and eviction records are not corrected or removed from reports. As described in the reports:

  • Tenant background check content for landlords has questionable relevance, particularly given the lack of rental payment history.
  • As corporate landlords have increased their rental holdings, the demand for digital, algorithmic scoring of prospective tenants has increased.
  • Renters pay for the reports, but often do not see them, and struggle to get errors fixed.
  • Market dysfunctions result in companies selling erroneous data to landlords.
  • Renters often do not receive adverse action notices, a legal right for renters.

The CFPB’s report on the state of the tenant screening market is an analysis of industry research, legal cases, academic research, the CFPB’s market monitoring, and other third-party sources. The CFPB’s consumer snapshot analyzes more than 24,000 complaints and results from focus groups with 44 renters.

“When a company produces a tenant background check report that is riddled with errors, it can cause serious harm to a family seeking housing,” said CFPB Director Rohit Chopra. “These background reports are heavily used by corporate landlords… so we are taking steps to ensure these reports do not contain false information.”

In 2021, the CFPB issued an advisory opinion regarding false identifications in background screening. The CFPB affirmed that the practice of matching consumer records solely through the matching of names is illegal under the federal Fair Credit Reporting Act (FCRA) that regulates background checks in the United States.

Employment Screening Resources (ESR) is a service offering of ClearStar, a leading Human Resources technology company that specializes in background checks, drug testing, and occupational health screening. ClearStar also offers FCRA-compliant tenant screening services. For more information, contact ClearStar.

NOTE: Employment Screening Resources (ESR) – a service offering of ClearStar – does not provide or offer legal services or legal advice of any kind or nature. Any information on this website is for educational purposes only.

© 2022 Employment Screening Resources (ESR) – A Service Offering of ClearStar – Making copies of or using any part of the ESR News Blog or ESR website for any purpose other than your own personal use is prohibited unless written authorization is first obtained from ESR.

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