FTC Provides Guidance Regarding Tenant Background Checks
August 9, 2023
The Federal Trade Commission (FTC) recently announced guidance for landlords, property managers, and others who require background checks on potential tenants. The tenant screening reports often contain information such as rental and eviction history, criminal history, and credit history.
The guidance reminds housing providers, “Background checks from consumer reporting agencies are consumer reports, and under the law, [they] have certain responsibilities when it comes to using them.” It also clarified that individuals or businesses could obtain consumer reports only for permissible purposes. In addition, it stressed that they must use the consumer report for that purpose only, emphasizing no further uses.
The FTC also clarified what qualifies as “adverse actions.” For example, the agency revealed that adverse actions include using information from a consumer report, however briefly. Denying housing to an applicant or asking for a different deposit amount due to a consumer report also counts as adverse actions.
The Fair Credit Reporting Act (FCRA) presides over adverse actions and requests for reports from consumer reporting agencies (CRAs). It requires housing providers to notify the applicant in an adverse action notice. The notice can be electronic, oral, or written. It must contain the following.
- The name, address, and phone number of the CRA (including a toll-free number for nationwide CRAs) that supplied the report
- A statement that the CRA did not make the adverse decision and cannot explain why the decision
- Notice of the consumer’s right to a free copy of their report from the CRA if requested within 60 days FCRA § 612
- Notice of the consumer’s right to dispute the accuracy or completeness of any information provided by the CRA FCRA § 611
- The consumer’s credit score, if used
The adverse action notice must inform individuals of their right to access the information in the consumer report. It allows consumers to review the report’s contents. In addition, this report would allow consumers to dispute the details if they find misinformation or inaccuracies.
The guidance suggests supplying the consumer with adverse action notices in writing. This recommendation is because written notices benefit the housing provider and applicant. For example, housing providers may use it as physical proof of compliance. In addition, applicants may use it to assert their rights when requesting a copy of their consumer report from the CRA that supplied it to the landlord. It also helps the dispute process when applicants challenge errors in their reports.
Similar to housing providers, employers must comply with the FCRA. Compliance includes providing an adverse action notice when taking related actions. Examples of adverse actions include denying employment or a promotion based on a consumer report. The best way to ensure compliance during the hiring process is to partner with an experienced background check company.
Information provided here is for educational and informational purposes only and should not constitute as legal advice. We recommend you contact your own legal counsel for any questions regarding your specific practices and compliance with applicable laws.