How to Comply with the Fair Credit Reporting Act

• A credit report from a credit bureau, such as Trans Union, Experian, and Equifax or an affiliate company;
• A report from a tenant-screening service that describes the applicant’s rental history based on reports from previous landlords or housing court records;
• A report from a tenant-screening service that describes the applicant’s rental history, and also includes a credit report the service got from a credit bureau;
• A report from a tenant-screening service that is limited to a credit report the service got from a credit bureau; and
• A report from a reference-checking service that contacts previous landlords or other parties listed on the rental application on behalf of the rental property owner.
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  Landlords often ask applicants to give personal, employment and previous landlord references on their rental applications. Whether verifying such references is covered by the FCRA depends on who does the verification. A reference verified by the landlord’s employee is not covered by the Act; a reference verified by an agency hired by the landlord to do the verification is covered.

  
  

  What is an Adverse Action?

  
  

  An adverse action is any action by a landlord that is unfavorable to the interests of a rental applicant. Common adverse actions by landlords include:

• Denying the application;
• Requiring a co-signer on the lease;
• Requiring a deposit that would not be required for another applicant;
• Requiring a larger deposit than might be required for another applicant; and
• Raising the rent to a higher amount than for another applicant.

The Adverse Action Notice

When an adverse action is taken that is based solely or partly on information in a consumer report, the FCRA requires you to provide a notice of the adverse action to the consumer. The notice must include:

• The name, address and telephone number of the CRA that supplied the consumer report, including a toll-free telephone number for CRAs that maintain files nationwide;
• A statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give the specific reasons for it; and
• A notice of the individual’s right to dispute the accuracy or completeness of any information the CRA furnished, and the consumer’s right to a free report from the CRA upon request within 60 days.

Disclosure of this information is important because some consumer reports contain errors.

The adverse action notice is required even if information in the consumer credit report was not the main reason for the denial, the increase in security deposit or rent or other adverse action. In fact, even if the information in the report plays only a small part in the overall decision, the applicant still must be notified.

While oral adverse action notices are allowed, written notices provide proof of FCRA compliance.

Non-Compliance with the FCRA

Landlords who fail to provide required disclosure notices face legal consequences. The FCRA allows individuals to sue landlords for damages in federal court. A person who successfully sues is entitled to recover court costs and reasonable legal fees. The law also allows individuals to seek punitive damages for deliberate violations of the FCRA. In addition, the Federal Trade Commission (FTC), other federal agencies and the states may sue landlords for non-compliance and get civil penalties.

However, a landlord who inadvertently fails to provide a required notice in an isolated case has legal protections, so long as he or she can demonstrate “that at the time of the . . . violation he maintained reasonable procedures to assure compliance” with the FCRA.