On January 25, 2023, the Biden-Harris Administration announced new actions to increase fairness in the rental market and further principles of fair housing that align with the White House “Blueprint for a Renters Bill of Rights” that the Administration simultaneously released to, among other things, ensure tenant background checks are legal, fair, and non-discriminatory.
“It is important to note that exclusion in rental markets manifests in different ways, such as through inaccurate information appearing in tenant background checks. It is essential that tenant background checks are legal, fair, and non-discriminatory to ensure renters can access housing and have neighborhood choice,” the “Blueprint for a Renters Bill of Rights” stated.
While discrimination in housing takes many forms, it “also results from algorithms and credit reports used routinely in background checks and screening reports on tenant applicants, which can have negative effects on housing options, particularly for Black, Latino, and Asian households who are at greater risk of error in these reports,” the Blueprint explained.
“Although housing providers are legally required to provide adverse action notices, many applicants for rental housing do not receive any notice of the reason they are denied housing. Receiving notice of the reason for the denial would enable them to correct errors in a tenant screening report or address other reasons that might affect future housing access.”
The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) also announced they will collect information to identify practices that unfairly prevent applicants and tenants from accessing or staying in housing in order to inform enforcement and policy actions. With regard to tenant background checks, the White House announced new actions:
- The CFPB has said it will identify guidance or rules that it can issue to ensure that the background screening industry adheres to the law, and coordinate law enforcement efforts with the FTC to hold tenant background check companies accountable for having reasonable procedures to ensure accurate information in the credit reporting system. The CFPB has also stated that it will continue to coordinate with federal and local government agencies to ensure that tenant screening companies do not illegally disseminate false and misleading information about tenants and that tenants can challenge erroneous information. People experiencing problems with a tenant background check can submit a complaint to the CFPB at www.consumerfinance.gov/complaint.
- The Department of Housing and Urban Development (HUD), Federal Housing Finance Agency (FHFA), Department of Agriculture (USDA), and FTC have said they will work with CFPB to release best practices on the use of tenant screening reports, including the importance of communicating clearly to tenants the use of tenant background checks in denying rental applications or increasing fees and providing tenants the opportunity to address inaccurate information contained within background screening reports. HUD, FHFA, and USDA have said they will strongly encourage property owners in their respective portfolios to align with these best practices and inform them of any additional relevant legal requirements in their respective portfolios. HUD will also release guidance addressing the use of tenant screening algorithms in ways that may violate the Fair Housing Act.
In addition, the FTC and CFPB “will seek information on a broad range of practices that affect the rental market, including the creation and use of tenant background checks, the use of algorithms in tenant screenings, and the provision of adverse action notices by landlords and property management companies,” according to a Fact Sheet about the Blueprint.
Another problem is that evictions continue to appear on tenant background checks. “Although many states have passed laws to seal eviction records, when eviction records are not sealed immediately, they can still haunt families. This is because background check companies may fail to remove records from their databases after they are sealed,” the Blueprint stated.
“Over 44 million households, or roughly 35 percent of the U.S. population, live in rental housing. And while federal laws such as the Fair Housing Act, the Americans with Disabilities Act, the Violence Against Women Act, and Fair Credit Reporting Act offer renters certain focused protections, there is no comprehensive set of federal laws protecting renters,” the Blueprint explained.
In November 2022, the CFPB issued two companion reports describing the tenant background check market and difficulties faced by prospective renters due to these reports. The CFPB also released advisory opinions affirming that background check companies that use poor matching procedures such as name-only matching can violate the Fair Credit Reporting Act (FCRA).
The “Blueprint for a Renters Bill of Rights” is a white paper published by the White House Domestic Policy Council and National Economic Council. It is a statement of principles; it is not binding and does not itself constitute U.S. government policy. It does not supersede, modify, or direct an interpretation of any existing Federal, state, or local statute, regulation, or policy.
ClearStar is a leading Human Resources technology company specializing in background checks, drug testing, and occupational health screening. ClearStar offers tenant screening solutions to help protect rental properties that comply with federal, state, and local laws regarding tenant background checks. To learn more, contact ClearStar.
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