Robert Doggett

Texas Rio-Grande Legal Aid

FAIR CREDIT REPORTING ACT

and some issues related to rental housing

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-consumer-reports-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

• Credit cards

• Student loans

• Mortgages

• Car loans

• Medical Debt

Housing related accounts

Utilities Cell phone accounts

Big 3 Other CRA’s

NON-MONETARY INFORMATION DAMAGING CREDIT- HOUSING

Criminal history

Not reported by Big 3 FICO score doesn’t

use criminal history as a factor

Tenant Specialty Screeners use to factor into report

Civil Litigation Records

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

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”

Also called TSBs (Tenant Screening Bureaus)

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/risk-compliance/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 toll-free 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 non-compliance 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

issuesProblematic timelinesPractical barriers to correcting

inaccuracies 3. Use of non-predictive info. in

analysis 4. Categorical exclusions 5. Questionable public records info.

1. ACCESS TO REPORT

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

Or lack thereof!

2. REINVESTIGATION

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); 

Steps (15 USC 1681i):

Eviction suits TSBs usually report

case filings, not judgments

Similar with other types of info.

May factor into score/recommendation

“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

3. Non-predictive info. 4. Categorical Exclusion

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??