Tenant Background Checks – What You Should Know About FCRA Requirements

Millions of residents across the United States are prospective renters who will be subject to a request for a background check from a landlord. While not all landlords run background checks, a significant number do. Landlords use the information contained in the background check reports to make decisions about prospective renters.

Background Check Consumer Reports are Covered Under the FCRA

The Fair Credit Reporting Act (“FCRA”) regulates how consumer and credit reports are obtained and used. A background check report is a type of consumer report that provides information on a person’s credit history, rental history, criminal history, and sometimes driving history. Landlords wishing to run background checks on rental applicants must comply with all requirements under the FCRA.

The FTC Issues Guidance on Landlord Background Checks

The Federal Trade Commission (“FTC”) recently issued guidance to landlords and background check companies to facilitate a better understanding about requirements under the FCRA. This guidance provides information to clarify the FCRA so that landlords and background check companies can ensure they are taking all necessary measures to comply with the law.

Landlords have a basic understanding of the FCRA when screening tenants, but typically do not review or take time to understand the full provisions of the law. The FCRA requires a landlord to have express and written consent before running a background check on an applicant. Once a landlord is finished with an applicant’s background check report, the landlord must dispose of the report in a secure manner. Further, the landlord cannot use the report for any purpose other than approving or denying an application.

Additionally, under the FCRA, if a landlord takes “adverse action” on an applicant (such as denying the application, requiring a co-signor, or requiring that the applicant pay more in rent than another applicant), the landlord must give notice of that determination. This is referred to as an “adverse action notice.”

When an adverse action notice is required, the landlord must provide the applicant with the name and address of the company that prepared the report, and information on how the report can be disputed. The FTC guidance provides examples for when landlords must give notice to applicants of adverse action. This is the case regardless of whether the background check report played a significant role in the landlord’s decision.

If a landlord has taken adverse action against an applicant without providing the prospective tenant with appropriate notice, then that landlord may be in violation of the FCRA.

Contact The Kim Law Firm, LLC Today to Speak with a Consumer Protection Attorney

If your application for rental housing has been denied or if you simply have questions about the background check process, contact a Consumer Protection and FCRA Attorney at The Kim Law Firm, LLC today by calling 855-996-6342 for a no cost consultation.