Gravel2Gavel Construction & Real Estate Law Blog
Senator Sherrod Brown (D-OH), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, has written to newly confirmed Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, asking him to review companies in the tenant screening industry for possible Fair Credit Reporting Act violations and other violations of U.S. laws. The CFPB, for its part, has already published a bulletin alerting Consumer Reporting Agencies (CRAs) and other furnishers of consumer information that, as federal, state and local pandemic-related housing protections expire, the Bureau will be giving greater enforcement focus to these businesses’ compliance with accuracy and dispute obligations under the Fair Credit Reporting Act (FCRA) and Regulation V. While it is still unclear whether Director Chopra will direct the Bureau to investigate specific businesses flagged by Chairman Brown, the tenant screening industry will likely face increased scrutiny in the coming months, which may impact their service offerings and cause interruptions for landlords relying on these businesses and services.
There are approximately 2,000 tenant screening companies across the United States. These companies are used by landlords to better identify and perform background checks on prospective tenants. These reports typically provide a prospective tenant’s rental and eviction histories, credit score, debt-to-income ratio, and outstanding credit obligations, among other financial metrics. The reports also usually include a criminal background check, including searches of sex offender registries and other public records searches. Many tenant screening companies then use this information to provide an estimate of the risk that each tenant presents, calculated through proprietary algorithmic formulas. These reports are usually available to landlords at a cost ranging from approximately $5 to $55 per report, usually passed through to the prospective tenant through application fees.
Given the direct impact that these reports have on the ability of prospective tenants to secure housing rentals, the Senate Committee on Banking, Housing, and Urban Affairs has started to turn its attention to allegations that tenant screening reports are regularly including inaccuracies and other misleading information, potentially in violation of the Fair Credit Reporting Act and other laws.
In April 2021, Chairman Brown wrote to 10 companies asking for information on their business practices. In these letters, he flagged concerns that the COVID-19 pandemic and other housing market instability is leading to a “growing number of lower-income renters competing for a limited number of housing units” and that “the results of a tenant screening report can mean the difference between a renter and their family finding a home or being locked out of the rental market.” Sen. Brown also flagged the particular impact that inaccurate information in the reports may have on low-income renters, and those on fixed incomes, including senior citizens. The letters also requested information that could determine if “Black, Brown, and other ethnic minority renters are negatively impacted by tenant screening criteria and methodology.”
Following this request for information, on October 20, Chairman Brown (D-OH) wrote to Director Rohit Chopra, explaining the Committee’s findings, and asking him to review the tenant screening industry, in order to better protect renters and ensure that accurate information is being furnished to landlords. In his letter, Chairman Brown reported that, “[d]espite efforts to validate information, the Committee found that a significant number of tenant screening reports contained inaccurate information” and that “the economic costs associated with screening report inaccuracies can potentially have devastating consequences on low-income communities,” including loss of a non-refundable application fee, limits to the number of applications a household may submit while seeking housing, and ultimately “may prevent households from securing safe, decent, and conveniently located affordable housing.”
Chairman Brown also raised concerns that these tenant screening businesses were not acting in accordance with the FCRA, which mandates that criminal information may not be included on tenant screening reports if the arrest or conviction is more than seven years prior. With nearly all tenant screening companies providing criminal background check services, the Committee found that there was significant risk that the reports were including outdated information, and providing matching errors that could lead qualified prospective tenants to being classified as ineligible for rental programs. Chairman Brown also stated that the Committee found that misleading eviction histories were also being included in these reports, including information on eviction filings that did not lead to ejectment or final judgment in favor or a property manager. Chairman Brown ultimately concludes by asking Director Chopra to begin a “thorough review of the tenant screening industry and use its authorities to the fullest extent possible to protect renters.”
Even prior to Rohit Chopra’s confirmation, the CFPB appeared poised to begin its own investigations and enforcements into the tenant screening industry. On July 7, the CFPB published a bulletin alerting CRAs and furnishers of consumer information that the Bureau intends to pay specific attention to the accuracy of rental information and associated dispute provisions as required under the FCRA and Regulation V. The bulletin raised concerns that such inaccurate or misleading information could “have devastating impacts on consumers, including impairing the ability of renters negatively impacted by the pandemic to secure new rental housing and otherwise recover from the pandemic’s economic effects” and that “[a]n increase in housing instability caused by inaccurate rental information could undermine the nation’s efforts to recover from the pandemic.” In response to these issues, the Bureau stated it intends to pay particular focus to, among other things, whether CRAs and furnishers of rental information are providing accurate rental information, whether these businesses are complying with obligations to investigate disputed information and make timely and reasonable investigations into such disputes, and whether furnishers are providing information about rental arrearages that include fees and penalties that are prohibited by pandemic relief protections (including the CARES Act).
With Director Chopra now at the helm of the CFPB, such investigations and enforcement into the tenant screening industry (for both CRAs and furnishers) are likely to continue. Director Chopra was confirmed at the start of October after a narrow Senate confirmation vote and has now taken charge of the Bureau. Under his leadership, the Bureau is largely expected to be more active and investigation-focused than under its previous director. Having previously worked for the CFPB under the Obama Administration, and more recently as a commissioner at the Federal Trade Commission, Chopra is known as a strong consumer advocate and has vowed to address the ongoing financial impacts of the COVID-19 pandemic, including those affecting the rental markets.
Given Director Chopra’s reputation for driving consumer protections, the CFPB’s public bulletin on its new enforcement stance, and Chairman Brown’s ongoing attention to the accuracy of information provided by the tenant screening industry, it is likely that there will be coming enforcement matters related to inaccurate reports in tenant screening businesses. Landlords and management companies relying on these tenant screening services should be prepared for possible changes to these services in response to increased government scrutiny.