On October 12, 2023, the Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) ordered a nationwide consumer reporting agency (CRA) to pay $23 million for alleged violations of the Fair Credit Reporting Act (FCRA) for failing to ensure the rental background checks used by landlords to decide who gets housing were accurate.
The CFPB and FTC requested a federal court to order the CRA to pay $15 million for its lawbreaking behavior and to make improvements to how it reports evictions. The CFPB is also ordering the CRA to pay $8 million for lying to consumers about placing or removing security freezes on credit reports. In the joint complaint, the CFPB and FTC alleged the CRA:
- Failed to take steps to produce accurate reports: The company violated the Fair Credit Reporting Act by failing in numerous instances to take steps to assure the maximum possible accuracy of eviction records in its rental background check reports. For example, the company failed to assure that its reports reflected the current status of public records. This included failing to share information showing that an eviction was dismissed and not preventing the inclusion of sealed records or multiple entries about the same eviction case. As eviction data is often weighed heavily in assessing rental risk, inclusion of inaccurate and duplicative eviction information is particularly harmful to renters and their families.
- Failed to identify who provided inaccurate information: When the company obtained criminal and eviction records from third-party vendors, it failed to identify the third-party vendors in its disclosures to consumers. Instead, the company told people that criminal and eviction records were taken only from the jurisdictions where the proceedings took place. People trying to find a place to live did not know it was a third-party vendor that they needed to contact to correct inaccurate information.
The CFPB had previously highlighted widespread problems in the use of rental background check reports. These reports rely too often on inaccurate or misleading information to make a recommendation to landlords. As a result, people are denied housing, charged more for housing, spend longer finding housing, and incur more housing search costs.
“Americans across the country were put at risk of wrongful housing denials because [the CRA] failed to follow the law. We are ordering [the CRA] to cease its yearslong illegal activity, clean up its broken business practices, redress its victims, and pay penalties,” CFPB Director Rohit Chopra said in a news release about the CRA being asked to pay $23 million.
“Consumers struggling to find housing shouldn’t be shut out by tenant screening reports that are ridden with errors and based on data from secret sources. Protecting consumers looking for housing is critical to a fair economy. We are proud to partner with the CFPB in obtaining this record-breaking order,” said Sam Levine, Director of the FTC’s Bureau of Consumer Protection.
In July 2023, the FTC offered guidance for landlords, property managers, and other housing providers who may run background checks on prospective tenants that explains how tenant background checks from CRAs are consumer reports and that landlords “have certain responsibilities” when using them to comply with the federal FCRA.
“What if the information in a consumer report leads you to deny housing to the applicant or require them to pay a deposit you wouldn’t make other applicants pay? Under the Fair Credit Reporting Act, you must inform applicants in what’s called an adverse action notice. That’s true even if the report was only a minor factor in your decision,” the guidance states.
“An adverse action notice tells people about their rights to see information being reported about them and to dispute inaccurate information,” the guidance goes on to explain. “It’s a best practice to provide that adverse action notice in writing because it benefits both you and the applicant. Written notices give you proof of compliance with the law.”
Adverse action notices also enable applicants to assert their rights to request a copy of the report from the CRA and to dispute any mistakes. The FCRA specifies the information to be included in an adverse action notice and details other responsibilities for using consumer reports. To learn more, read the FTC Guidance “Using Consumer Reports: What Landlords Need to Know.”
ClearStar is a leading global Human Resources technology company that specializes in background checks, drug testing, and occupational health screening. ClearStar offers FCRA-compliant tenant background screening services that help landlords protect rental properties. For more information about tenant background screening services, please contact ClearStar.
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Thomas Ahearn - Digital Content Editor
Thomas Ahearn is a Digital Content Editor at ClearStar, a leading Human Resources technology company specializing in background checks, drug testing, and occupational health screening. He writes about a variety of topics in the background screening industry including Artificial Intelligence (AI), "Ban the Box," class action lawsuits, credit reports, criminal records, drug testing, Equal Employment Opportunity Commission (EEOC), Fair Credit Reporting Act (FCRA), identity theft, privacy, social media screening, and workplace violence.
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