On February 28, the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) jointly issued a Request for Information, seeking public comment on how background screening affects individuals seeking rental housing in the United States. Specifically, the Request seeks information on the use of consumer reports and credit scores, criminal and eviction records, and algorithms in the tenant screening process.
This is just the latest action from the FTC and CFPB on the issue of tenant screening. As discussed here, on November 15, the CFPB issued two reports, highlighting what it perceived to be forms of errors that frequently occur in tenant background checks and the impact the CFPB believed those errors could have on potential renters. As a result of the reports, the CFPB pledged to work closely with the FTC to take action on those issues.
According to the press release that accompanied the release of the Request, the “CFPB has received thousands of complaints about tenant background checks and heard many stories of people being rejected from housing because someone else’s negative information, like a criminal record or eviction, incorrectly appeared in their report. Other complaints have highlighted how difficult it can be to have tenant screening companies fix errors. Finally, people tell us they can’t find out what information factors into the ‘risk scores’ used to deny them rental housing.”
On this basis, the agencies seek information about:
- Tenant Screening Generally.
- How are landlords and property managers currently setting criteria and using background screening products to assess prospective tenants? To what extent are they informing prospective tenants about their criteria?
- To what extent do landlords and property managers address barriers for prospective tenants with limited English proficiency or disabilities?
- Do tenant screening practices have unique impacts on certain groups or communities, such as Black, Indigenous, and people of color; the LGBTQI+ community; military service members; immigrants; public housing voucher recipients; or renters with disabilities?
- Criminal and Eviction Records in Tenant Screening.
- How do landlords and property managers obtain this information? Do they ask prospective tenants about their backgrounds or purchase background reports?
- How accurate are these records and how useful or relevant are they in assessing whether a particular individual is more likely to have a negative housing outcome?
- Using Algorithms in Tenant Screening.
- How are consumer reporting agencies using algorithms to match credit, criminal, and eviction records to consumers for inclusion on credit and tenant screening reports, and making predictions about prospective tenants?
- Where is the data obtained for use in these algorithms?
- What steps are being taken to ensure that algorithms that make recommendations about prospective tenants are not discriminating based on race, sex, disability, or other protected class?
- To what extent do consumer reporting agencies allow tenants to dispute the recommendation produced by an algorithm? To what extent do landlords or property managers re-assess housing applications following a tenant’s dispute or correction of scoring criteria or underlying data?
The deadline for comments is May 30.
The FTC and CFPB have also taken aim at tenant screening issues through enforcement actions. As discussed here, in March 2022, TransUnion received a Notice and Opportunity to Respond and Advise letter from the CFPB alleging that the company and its tenant and employment screening business TransUnion Rental Screening Solutions, Inc. failed to: “(i) follow reasonable procedures to ensure maximum possible accuracy of information in consumer reports and (ii) disclose to consumers the sources of such information.” On July 27, 2022, the CFPB advised TransUnion that it had obtained authority to pursue a joint enforcement action with the FTC. TransUnion is now in active settlement discussions with the federal regulators.
Troutman Pepper will continue to monitor developments involving the FTC and CFPB related to tenant screening and will provide further updates as they become available.