Dan Firestone
Vice President / Director
Caryn Bennett
Compliance Manager
 Important: The information in this presentation is for
general guidance only. CIC, its officers, employees,
and agents do not accept any liability to any person
for the information or advice given in this
presentation.
 CIC does not provide legal advice and nothing
contained in this document or provided by CIC should
be deemed as legal guidance.
 This document is authorized and distributed by
Contemporary Information Corp. 42913 Capital Dr.
Unit 101, Lancaster, CA 93535
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The “Goal” of screening Applicants (It’s Important)
ECOA, FCRA, & FACTA
Adverse Action Notices
Creating a Screening Process & Accepting Applications
Rental History and Employment/Income Verification
Establishing Your Screening Criteria / What to Consider? (HUD – USDA)
Identification & Identity Documentation
Identity Theft Prevention-SSN vs. ITIN
FICO Scores
Co-Signers
Record Retention
Criminal Background Checks
Disparate Impact
Questions?
 Good vs. Bad-The application process is intended for landlords, property
owners and property managers to mitigate risks and to ensure the safety of the
residents and the integrity of their property from matters such as financial,
criminal, and physical (i.e. vandalism) damages or losses. Your property is an
investment-screening applicants protects that investment.
 This process is NOT to be used for any intent of discrimination.
 Each application that is processed must be treated equally. You cannot run a
criminal report on one particular applicant just because you have a “feeling”.
This is discriminatory.
 Your application should include language stating that the applicant gives you
the authorization of disclosure for such information.
Proper resident selection: DON’T RUSH.
Improper screening can - and will - affect your NOI
Turnovers, bad debt, and attorney’s fees can be costly
Enacted in 1974 to ensure individuals are not discriminated against based upon
factors that are not directly related to their creditworthiness. Under the law, it is
unlawful to discriminate based on religion, national origin, race, sex, marital
status, age, or gender of the individual.
Make sure to check state and local laws that may have more provisions on
additional protected classes.
Protected Classes
Race
Color
Religion
Sex (including Gender Identity)
Age
Familial Status
National Origin
Disability
Marital Status
Ancestry
Sexual Orientation
Source of Income
No arbitrary discrimination. For example; you deny the applications of all
people with tattoos or piercings. Although they are not in a protected class this is
arbitrary discrimination.
 The FCRA was passed for the protection of consumer privacy as well as to
ensure the accuracy of reportable information.
 WRITTEN adverse action notices are REQUIRED for any applicant who has
been denied OR when the terms of the initial arrangement are less than
optimal.
 Example: The applicant’s credit is below the needed criteria; company policy
requires a co-signer. This REQUIRES a “conditional adverse action notice”
because the terms or original arrangement are not the best terms available.
 MAKE SURE TO REFER TO YOUR WRITTEN POLICIES & PROCEDURES.
This is important to make sure you are properly carrying out and enforcing the
criteria set by management in your organization AS WELL AS being in proper
compliance with FCRA Regulatory Mandates.
 What to send with the notice of Denial or the Conditional Notice (AKA
Adverse Action)?
 A written notice detailing the sources used, contact information, Dodd-
Frank Act (scores and score factors) and the basis for the denial (why)
 A copy of the FCRA Summary of Rights (Can be found on the CFPB’s
website-FTC is no longer the regulatory agency for this effective July of
2012)
 Added sections to the FCRA intended to help consumers fight identity theft. In
addition, the legislation addressed accuracy, privacy and consumer rights to
disclosure.
 Enacted by Congress in 2003
 Allows Consumers to limit the usage of their personal information by businesses
 Allows Consumers to put a “consumer statement” or “block/freeze” on their
credit/consumer report in cases (or suspicion of) identity theft.
 Limits Corporations from sharing information between sister entities for the purpose
of marketing, collections and others.
 Regulates Credit Reporting Agencies (CRAs) due diligence procedures and timelines
regarding disputed data on the consumers report.
 Red Flag Ruling & Address Discrepancy “Reasonable Means”- 4 parts
 Must have a written procedure, must verify ID information as well as information
provided on application (i.e. DL & SSN), if addresses cannot be substantiated on
the consumer report, additional documents (i.e. utility bill) are required, lastly, if
it cannot be verified, ruling states you cannot rent to the individual.
 Must be provided to applicant within 72 hours
 A notice of Denial or the Conditional Notice
 The creditor’s name and address
 Scores and score factors (Dodd-Frank Act)
 The principle and specific reasons for the action taken
 The FCRA Summary of Rights in English and Spanish
 Make sure all applicants 18+ years of age complete, in full, a written
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application for residency.
If a paper application is used, read the completed application
thoroughly. Look for gaps in residency history. Make sure you can
read the items that have been completed by the applicant.
Before signing the lease, VERIFY the SSN & DL/State ID card
information with the physical copy and what was provided on the
application.
It is recommended that you make a photocopy of the DL or State
issued ID card as well as the SSN card.
Verify rental history& employment/income information. Ask your
local association for available products and services that are
available to you with your membership.
Don’t Accept Incomplete Applications & watch for sloppy writing
 The Verification Process – Check All Information Carefully
 Does the signature match?
 Do the date of birth, name, address, and identification numbers match to
those on the photo identification?
 Do the documents appear genuine?
 Does the information on the pay-stub match the information on the rental
application and photo identification.
 “Red Flag Ruling”-amends the current Fair and Accurate Credit Transactions
Act of 2003.
 Social Security Card, Individual Tax Payer Identification Number
 Watch for Social Security Number (SSN) alerts on credit report.
(FYI- the Social Security Administration has created a “randomization” of
SSN’s due to the rise of ID theft. Therefore, SSN’s are NO LONGER issued
by geographical area sequences)
 Verify, verify, verify
 Before signing the lease, compare the information that
was provided online with the government-issued
photo identification.
 Does the photo resemble the person in your office?
 Is the name exactly the same?
 Does the date of birth match?
 Was the address on the ID submitted?
 Does the signature match?
Question discrepancies. Although online applications are
convenient for everyone, they may pose an increased risk of
identity fraud if caution is not used
 Watch for fraud
 Bank statements, W2’s, recent pay-stubs etc.…
 Check phone book or internet for employment telephone number
match
Verify Past Rental Experiences:
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Call “411” or check phone book
Ask specific questions:
When did the resident move in/out?
How much rent was being paid? Was the rent current?
Any pets?
Any Three-Day Notices served?
Has the resident given notice of intent to vacate?
Would you rent to this applicant again?
 Do you know what your criteria is? Does you staff know?
 Do you have a WRITTEN policy clearly disclosing your criteria for screening prospective
residents?
 Many communities have their written criteria posted in their leasing office as well as
copies of the requirements attached to the application for residency.
 Before posting or dispersing your criteria make sure that it is in compliance with local,
state, and federal requirements for Fair Housing.
 Things to consider:
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What is the minimum income to rent ratio accepted
Will the ratio even be used?
FICO score
No Credit / Thin Credit / Bad Credit
How much past rental history is required in your process?
How much work or income history is required in your process?
How will late rent be taken into account?
Will habitual NSF’s be allowed?
What about Bankruptcies or Foreclosures?
Will you consider a co-signer?
 http://www.rurdev.usda.gov/supportdocuments/3560-
2chapter06.pdf
 A social security number is an important aspect of retrieving a
credit report. Without it, there is a high likelihood of pulling a
“no record” report.
 ITIN numbers are not used in the credit bureaus database
 A consumer credit report is vital to the screening process
because:
 Shows financial responsibility (or lack of)
 May show discrepancies alerting to possible identity fraud
 May provide information not disclosed by the applicant (i.e.
additional addresses or aliases)
 ITIN = Individual Tax Identification Number
 For those that are working towards citizenship for the U.S. or have the legal right to work in
the U.S. they are issued a ITIN .
 ITINs start with the # 9.
 Remember this is NOT a SSN. In some cases it may appear to be treated like one, but they
are not the same. The bureaus do not use ITIN numbers
 Those without SSN OR who have ITIN’s must still be properly screened when applying for
residency. This is REQUIRED by Fair Housing.
 Per HUD a 2003 memo issuance was sent stating that it is unlawful to discriminate against
individuals as protected under the ECOA (race, gender etc.); It does not clearly identify
citizenship as a protected class. However, it DOES require that the same application
process be applied to everyone who applies for residency at your property.
 Written procedure must also take into account those of non-citizenship status. Applicants
with non-citizenship must still have the same credit and background check screening
process as any other applicant.
 This is a complex algorithm created by Fair Isaac & Company.
 It ranges from 300-850 the higher the score, the lower the risk.
 Probability of financial risk of the consumer/applicant based on the
credit data of that consumer.
 Reflects score factors which weighed most heavily on the calculation
of the score.
 The FICO score analyzes the credit history, payment history, public
records, total available credit, strengths of trade lines (i.e. Mortgage,
Revolving, Installments), number of inquires and other factors.
These are all weighed into the complex sequence of the algorithm.
 A Co-Signer may be needed for the financial protection of the unit for those residents
that meet only a partial amount of the required criteria (i.e. they have the income but
have a poor credit score).
Have written criteria in place for eligibility of co-signers
 Verify that the co-signer meets all of the rental criteria and that they have sufficient
income to absorb the applicant’s rental obligation if something goes sour.
 Complete a co-signer agreement. If you don’t have one, seek legal counsel for this
or refer to your company’s management.
 If the co-signer is not local, ensure their signature is notarized- ESPECIALLY if they
are out of state.
 Make sure the co-signer signs the lease agreement with the applicant.
 When the lease expires, its recommended that the resident’s information be
reevaluated. It’s possible that a co-signer will no longer be needed. ALSO consider
a policy should the co-signer not want to renew.
Keep all applications, both denied and approved, for no less than six (6)
years to be in compliance with both the FCRA and bureau policies.
Vital Leasing Documents to Retain:
Rental application
Written rental criteria/qualifications
Phone Log
Availability Log – the list of currently available units for rent
Detailed Guest cards or daily log
Screening checklist
Written community policies
Leases or rental agreements
Applications that you accept and REJECT
Copy of complete credit report that you accept and REJECT
Copies of adverse action notifications for denials or conditional
acceptance
 If its your policy (which its highly recommended) to process criminal
background checks on prospective residents, you MUST disclose that a
criminal background check will be processed in your authorization
disclosure.
 Make your criteria clear and concise.
 Make sure to check for past criminal offenses in all states where your
applicant has lived. Why?
 Not all states, law enforcement agencies, or jurisdictions report to a
central database.
 This is essential for eviction searches as well. What if the applicant
lived out of state and had been evicted?
 Industry standards for criminal record reporting and record
retention is First Name, Last Name, Date Of Birth.
 A theory of liability that prohibits an employer
from using a facially neutral practice that has an
unjustified adverse impact on members of a
protected class. A facially neutral practice is one
that does not appear to be discriminatory on its
face; rather it is one that is discriminatory in its
application or effect.
 In more simplified terms: Disparate impact is a way
to prove discrimination based on the effect of a policy
or practice rather than the intent behind it.
 Examples:
 Denial of all applicants with a criminal record (Does
the crime threaten the safety/security of the property
or other residents? How long ago was it? Has there
been remediation?)
 Denial of all applicants who are unemployed (Is there a
medical reason? Can the applicant show other means
of income/ability to pay?)
Presented by:
Dan Firestone
Vice President/Director
888-232-3822
dan@cicreports.com
Caryn Bennett
Compliance Manager
800-288-4757 #222
caryn@cicreports.com