FAIR CREDIT
REPORTING ACT
and some issues related to rental
housing
Robert Doggett
Texas Rio-Grande Legal Aid
IT ISN’T JUST FOR FOLKS WHO LOAN
“If you're a landlord, you may use consumer reports
to evaluate rental applications - as long as you
follow the provisions of the Fair Credit Reporting
Act (FCRA). The FCRA is designed to protect the
privacy of consumer report information and to
guarantee that the information supplied by
consumer reporting agencies (CRAs) is as accurate
as possible.
https://www.ftc.gov/tips-advice/business-center/guidance/using-consumerreports-what-landlords-need-know
WHAT IS A CONSUMER REPORT?
A consumer report contains information about a
person's credit characteristics, character, general
reputation, and lifestyle. A report also may include
information about someone's rental history, such as
information from previous landlords or from public
records like housing court or eviction files. The
most common type of CRA is the credit bureau.
To be covered by the FCRA, a report must be
prepared by a CRA - a business that
assembles such reports for other businesses.
-- Best Practice might be to treat all reports
the same
STATUTORY DEFINITION:
The term “consumer reporting agency” means any
person which, for monetary fees, dues, or on a
cooperative nonprofit basis, regularly engages in
whole or in part in the practice of assembling or
evaluating consumer credit information or other
information on consumers for the purpose of
furnishing consumer reports to third parties, and
which uses any means or facility of interstate
commerce for the purpose of preparing or
furnishing consumer reports.
15 U.S.C. 1681a(f).
TYPES
OF ACCOUNTS USUALLY
REPORTED
Big 3
•
Credit cards
•
Student loans
•
Mortgages
•
Car loans
•
Medical Debt
Other CRA’s
Housing related
accounts
 Utilities
 Cell phone accounts

NON-MONETARY INFORMATION DAMAGING
CREDIT- HOUSING
Criminal history

Not reported by Big 3


Civil Litigation Records

FICO score doesn’t use
criminal history as a
factor
Tenant Specialty
Screeners use to factor
into report
Big 3:
Judgments (debt
collection suits)
 Bankruptcies


In addition to these,
Tenant Screeners:
Evictions
 Tenant plaintiff suit
 PO petitions (DV, etc)

TYPES OF REPORTS USED:





A credit report from a credit bureau, such as Trans
Union, Experian, and Equifax or an affiliate
company;
A report from a tenant-screening service that
describes the applicant's rental history based on
reports from previous landlords or housing court
records;
A report from a tenant-screening service that
describes the applicant's rental history, and also
includes a credit report the service got from a credit
bureau;
A report from a tenant-screening service that is
limited to a credit report the service got from a credit
bureau; and
A report from a reference-checking service that
contacts previous landlords or other parties listed on
the rental application on behalf of the rental property
owner.
FTC ALSO SAYS:
“Landlords often ask applicants to give personal,
employment and previous landlord references on
their rental applications. Whether verifying such
references is covered by the FCRA depends on who
does the verification. A reference verified by the
landlord's employee is not covered by the Act; a
reference verified by an agency hired by the
landlord to do the verification is covered.”
SOME TENANT SPECIALTY SCREENERS
PER CFPB
Contemporary Information Corp.
 CoreLogic
 SafeRent
 Experian RentBureau
 First Advantage Corporation Resident History
Report
 LeasingDesk (Real Page)
 Screening Reports, Inc.
 Tenant Data Services TransUnion Rental
Screening Solutions, Inc. .

TENANT SPECIALTY SCREENING
COMPANIES
Also called TSBs (Tenant Screening Bureaus)
TSBs are CRAs
 Approx. 650 TSBs in US (per NY Times, 11/26/2006)

Most compile and sell reports to LLs (on contract)
 Association models are also common
 TSBs now consolidated; about 90% owned by 5 main
companies


TSB must “follow reasonable procedures to assure
maximum possible accuracy of the information
concerning the individual about whom the report
relates”
FICO CHANGING WITH TIMES:

“FICO 9” no longer considers paid debt
and outstanding medical debt in its score
the same as other debt issues.
http://www.fico.com/en/blogs/riskcompliance/impact-medical-debt-fico-scores/
WHAT IS ADVERSE ACTION?
An adverse action is any action by a landlord that
is unfavorable to the interests of a rental applicant.
Common adverse actions by landlords include:
Denying the application;
 Requiring a co-signer on the lease;
 Requiring a deposit that would not be required
for another applicant;
 Requiring a larger deposit than might be
required for another applicant; and
 Raising the rent to a higher amount than for
another applicant.

ADVERSE ACTION NOTICE
When an adverse action is taken that is based solely or
partly on information in a consumer report, the FCRA
requires you to provide a notice of the adverse action to
the consumer. The notice must include:
 the name, address and telephone number of the CRA
that supplied the consumer report, including a tollfree telephone number for CRAs that maintain files
nationwide;
 a statement that the CRA that supplied the report did
not make the decision to take the adverse action and
cannot give the specific reasons for it; and
 a notice of the individual's right to dispute the
accuracy or completeness of any information the CRA
furnished, and the consumer's right to a free report
from the CRA upon request within 60 days.
FTC SAYS THIS ABOUT THE NOTICE:
The adverse action notice is required even if
information in the consumer report was not the
main reason for the denial, the increase in security
deposit or rent or other adverse action. In fact, even
if the information in the report plays only a small
part in the overall decision, the applicant still must
be notified.
FOR EXAMPLE:
The adverse action notice must name the CRA that
provided the report to the landlord, even if the
information came from another CRA.
For example, a report from XYZ TenantScreen includes
a credit report from ABC Credit Bureau. The credit
report includes negative information that prompts the
landlord to turn down the rental application. The
adverse action notice should name XYZ TenantScreen
as the CRA because XYZ TenantScreen actually
provided the report to the landlord. The notice also can
explain that XYZ TenantScreen got the credit
information from ABC Credit Bureau, but that is not
required under the FCRA.
FTC SAYS:
“While oral adverse action notices are allowed,
written notices provide proof of FCRA compliance.”
-- Best Practices ….
EXAMPLE 1
A landlord who orders a consumer report from a
CRA. Information contained in the report leads to
further investigation of the applicant. The rental
application is denied because of that investigation.

Since information in the report prompted the
adverse action in this case, an adverse action
notice must be sent to the consumer.
EXAMPLE 2
An applicant with an unfavorable credit history,
like past-due credit accounts, who is denied an
apartment. Although the credit history was
considered in the decision, the applicant's poor
reputation as a tenant in his current location
played a more important role.

The applicant is entitled to an adverse action
notice because the credit report played a part,
however minor, in the denial.
EXAMPLE 3
A person with an unfavorable credit history, like a
bankruptcy, but no other negative indicators, who
applies for an apartment. Rather than deny the
application, the landlord offers to rent the
apartment, requiring a security deposit that is
double the normal amount.

The applicant is entitled to an adverse action
notice because the credit report influenced the
landlord's decision to require a higher security
deposit from the applicant.
EXAMPLE 4
A landlord hires a reference-checking service to
verify information included on a rental application.
Because the service reports that the applicant does
not work for the employer listed on the application,
the rental application is denied.

The applicant is entitled to an adverse action
notice. The report is a consumer report from a
CRA (the agency checking the references
provided by the consumer on the application),
and its report influenced the landlord's decision
to deny the application.
EXAMPLE 5
A landlord who makes it a practice to approve an
application if the prospective tenant shows an
adequate income or has a favorable credit report, is
dealing with an applicant who has an inadequate
income and a bad credit report.

The applicant is entitled to an adverse action
notice because the credit report influenced the
denial, even though income was another factor.
NON-COMPLIANCE


Landlords who fail to provide required disclosure
notices face legal consequences. The FCRA allows
individuals to sue landlords for damages in federal
court. A person who successfully sues is entitled to
recover court costs and reasonable legal fees. The law
also allows individuals to seek punitive damages for
deliberate violations of the FCRA. In addition, the
Federal Trade Commission (FTC), other federal
agencies and the states may sue landlords for noncompliance and get civil penalties.
However, a landlord who inadvertently fails to
provide a required notice in an isolated case has legal
protections, so long as he or she can demonstrate
"that at the time of the . . . violation he maintained
reasonable procedures to assure compliance" with the
FCRA.
SOME STATE LAWS
SECTION 92.3515 TEXAS PROPERTY CODE

Landlord is required to provide printed notice of
the tenant selection criteria and grounds for
which the application may be denied including:





Criminal history
Previous rental history
Current income
Credit history
Failure to provide accurate or complete information
on the application form
GIVING A COPY TO THE RENTER
A consumer reporting agency may not prohibit a
user of a consumer report or investigative
consumer report from disclosing the contents of
the report or providing a copy of the report to
the consumer to whom it relates at the
consumer's request if adverse action against
the consumer based wholly or partly on the
report has been taken or is contemplated by the
user of the report. A user of a consumer report
or a consumer reporting agency may not be found
liable or otherwise held responsible for a
disclosed or copied report when acting under
this subsection. The disclosure or copy of the
report, by itself, does not make a user of the
report a consumer reporting agency.
 Tex. Bus. & Comm Code 20.02(b).
TENANT PROBLEMS

1. Lack of access to reports
 2.
FCRA dispute & reinvestigation issues
 Problematic timelines
 Practical barriers to correcting
inaccuracies
 3. Use of non-predictive info. in analysis
 4. Categorical exclusions
 5. Questionable public records info.
1. ACCESS
TO REPORT
Or lack thereof!

Required Disclosures (15 USC 1681g(a))
All info. in the consumer’s file at the time of the request
 Sources, inquiries


FCRA does not impose duty to create report at
consumer’s request


But failing to do so may be an unfair practice
If denied housing, must disclose report that was used
and applicant has a right to a free copy of that report
within 60 days
2. REINVESTIGATION
Steps (15 USC 1681i):




Consumer requests report from CRA (TSB)
CRA (TSB) sends report (no specific time limit but within
60 days)
Consumer lodges dispute
CRA (TSB) has 30 days to reinvestigate, report results


Only corrects report with that specific TSB unless inaccuracy
from big 3, then dispute sent to them and they should fix
If account not taken off, consumer has the right to 100
word statement tied to the account; info. has to be marked
as disputed in the file (renders it unreliable with other
lenders);
3. Non-predictive info.

Eviction suits
TSBs usually report
case filings, not
judgments
 Similar with other
types of info.


May factor into
score/recommendation
4. Categorical Exclusion
“It is the policy of 99
percent of our customers
in New York to flat out
reject anybody with a
landlord-tenant record, no
matter what the reason is
and no matter what the
outcome is, because if
their dispute has escalated
to going to court, an owner
will view them as a pain.”
- Jake Harrington,
founder of On-Site.com,
New York Times, Nov. 36.
2006
FAIR HOUSING LAW INTERSECTION
Policies that appear neutral on their face (“treat
everyone equally”) is not enough to comply with
the Fair Housing Act.
 Consider the changing employment criteria that
can be applied to criminal history
 For example, litigation is ongoing against
landlords who use tenant selection criteria that
are based on ideology and not on well-established
analysis that predict whether a person will be a
good tenant




Citizenship criteria
Criminal lookback periods
Blanket no arrest policies
SPEAKING OF FAIR HOUSING --AUSTIN –
The City of Austin currently prohibits a landlord
from discriminating based on the source of
income of the tenant (gov’t subsidy, child support,
etc.)
 This includes Section 8 vouchers if the tenant is
or was in the military
 Applies even to an owner of one house if an agent
is involved

5. PUBLIC RECORDS SYSTEMS
 Generally
not created for the purpose of
serving as de facto consumer reports
 Seldom subject to FCRA-type
completeness, accuracy, timeliness,
requirements
 Often lack procedures for correcting or
removing information
 Access may require user to acknowledge
disclaimers, agree to limits on use
FURNISHERS
Have a lot of duties, timelines, etc:
-
-
-
Accuracy of information
Duty to correct and update information
Must accept requests for corrections from consumers
Must notify CRAs if a consumer disputes information
Investigate and review all relevant information to
determine a dispute involving the completeness or
accuracy of information
Must report date debt placed with collection or
charged off with CRAs
Must have procedures to deal with notifications of ID
theft
QUESTIONS??