CFPB cites issues with tenant background reports; will seek to identify guidance or rules to ensure practices follow law

Erroneous information in tenant background checks is leading to higher costs and barriers to quality rental housing, the Consumer Financial Protection Bureau (CFPB) said in issuing a market report and a consumer “snapshot” focusing on the tenant background check industry.

The CFPB said the tenant background check industry creates reports that include extensive personal information, such as credit history, civil and criminal records, and credit scores, as well as the proprietary risk scores on which many landlords and property management companies base their decision to rent to a prospective tenant.

The two reports issued Tuesday include a report on the state of the tenant screening market, which the bureau described as an analysis of industry research, legal cases, academic research, the CFPB’s market monitoring, and other third-party sources; and a consumer snapshot, which the bureau said analyzes more than 24,000 complaints (the snapshot itself cites 26,700 complaints) and results from focus groups with 44 renters.

The bureau said the reports’ findings show that tenant background check content for landlords has questionable relevance. It also cited issues with the demand for digital, algorithmic scoring; the provision of erroneous data to landlords; and, among other things, the frequent absence of adverse action notices as required by the Fair Credit Reporting Act (FCRA).

In its market report, the bureau said the creation and use of tenant screening reports is regulated under the FCRA, state and local laws, and public housing and fair housing requirements. It said that as it continues to monitor and research this market and its effects on prospective renters, it will also:

  • Identify guidance or rules that that the CFPB can issue to ensure that the background screening industry adheres to the law.
  • Determine how to require the background screening industry to develop and maintain appropriate and accurate consumer reporting practices, in accordance with applicable law.
  • Coordinate law enforcement efforts with the Federal Trade Commission to hold tenant screening companies accountable for having reasonable procedures to assure accurate information in the consumer reporting system.
  • Coordinate with federal and local government agencies to ensure tenants receive information about potential inaccuracies in their reports in a timely fashion, and that adequate adverse action notices are provided.

CFPB Reports Highlight Problems with Tenant Background Checks

Tenant Background Checks Market Report

Consumer Snapshot: Tenant Background Checks

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