CFPB Reports Highlight Regulatory Concerns Over Tenant Background Checks // Cooley // Global Law Firm

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On November 15, 2022, the Consumer Financial Protection Bureau released two reports – titled “Tenant Background Checks Market Report” and “Consumer Snapshot: Tenant Background Checks” – that reflect concerns about incomplete and inaccurate data in tenant screening reports. The reports address issues raised in connection with the 2022 CFPB list of consumer reporting firms and in a 2021 CFPB bulletin, namely that the bureau viewed inaccuracies in tenant screening reports as potentially serious damage to financial life of individuals and believes that the risks posed by such inaccuracies could become even greater as pandemic-related measures to protect tenants expire. Interestingly, the reports came just a day after a White House meeting on renter protections and rent affordability, which was attended by more than 70 tenant leaders and advocates, housing providers, attorneys and housing policy experts.

Overview of the reports

The two reports are based on analysis of 17 tenant screening companies and more than 26,000 consumer complaints filed with the bureau between January 2019 and September 2022. Tenant screening firms are described by the Bureau as firms that provide landlords and property managers with identity checks and leases (including eviction records and rent payment histories), credit checks, income and employment checks, and/or criminal background checks. The CFPB cautions that the information these companies submit is often inaccurate, incomplete or out of date, and may have minimal value in actually predicting tenant behavior. Therefore, the CFPB concludes that “Some tenant verification firms do not comply with the statutory requirements under the [Fair Credit Reporting Act (FCRA)] ‘follow reasonable procedures to ensure the greatest possible accuracy’ of the information in the reports they produce.

The CFPB also emphasizes that landlords and property managers who rely on tenant screening reports are required to “provide a notice of adverse action to a claimant if they are denied or required to lease terms based on information in a screening.” to accept what others are not required to report,” they often don’t do. As a result, tenants were not consistently informed of their right to contest information in their tenant screening reports and therefore did not always understand how to file a challenge.

The final sections of both reports reflect the Office’s intention to continue to monitor tenant verification firms and take action to help tenants and tenant applicants exercise their rights. In particular, the Tenant Background Checks Market Report emphasizes that the CFPB will take further action to ensure tenant screening companies comply with FCRA by:

  • Identify guidelines or rules that can be issued to ensure compliance.
  • Determine how background screening companies may be required to develop and maintain reasonable and accurate consumer reporting procedures.
  • Coordinating law enforcement efforts with the Federal Trade Commission (FTC) — which included its own statement in the press release accompanying the CFPB reports — to ensure tenant verification firms employ proper procedures to ensure accurate information in the consumer reporting system.
  • Coordinating with federal and local authorities to ensure tenants receive timely information about potential inaccuracies in their reports and that compliant notices of adverse actions are provided.

In support of these statements, Consumer Snapshot: Tenant Background Checks references recent CFPB FCRA compliance publications and underscores the Office’s view that tenant screening firms are FCRA compliant and that the Offices must take note of the opinions expressed.

What to Expect

The reports do not announce immediate legal action or regulatory reform, but do reflect the bureau’s continued commitment to addressing inaccuracies in consumer reports and its intention to coordinate with other federal agencies, such as the FTC, as well as state agencies, to hold participants accountable to the consumer reporting industry . Given that the CFPB’s interest in renter protection is clearly shared by the FTC and the White House, we expect coordinated investigations and enforcement action, particularly from tenant audit firms, to be on the horizon.

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