2023-07-21
Tenant background checks, sometimes known as consumer reports, can include a variety of information, including rental and eviction history, credit, or criminal records.
When you use consumer reports to screen tenants and make tenant decisions, you must comply with the Fair Credit Reporting Act (FCRA), enforced by the Federal Trade Commission (FTC).
Background screening reports are covered by the FCRA if they are used to help decide eligibility for housing and include information “bearing on a consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.”
You must have a permissible purpose to obtain a consumer report, including screening for applicants and tenants who apply to rent housing or renew a lease. You may obtain written permission from applicants or tenants to show that you have a permissible purpose, and must certify to the reporting company that you will use the report only for housing purposes.
If you take an adverse action against a tenant or rental applicant you must give them oral, written, or electronic notice, including the reporting company contact information and an explanation of the applicant’s right to dispute the report. While oral adverse action notices are allowed, written notices that provide proof of FCRA compliance are preferred.
An adverse action can include: (!) denying a lease; (2) requiring a co-signor; or (3) requiring higher rent than for another applicant. The FTC’s guidance has more examples of when an adverse action notice is required.
You should maintain safeguards to protect the security of customer information while in your possession, and when you’re done using a consumer report the FTC Disposal Rule requires you to dispose of consumer information using reasonable and appropriate disposal practices to prevent the unauthorized access to or use of information in a consumer report. The disposal measures taken are to be reasonable based on the sensitivity of the information, the costs and benefits of different disposal methods, and changes in technology.