CFPB Finds Issues with Tenant Background Checks
The Consumer Financial Protection Bureau (CFPB) on November 15, 2022, issued two reports on the tenant background check industry. Details in the reports reveal that background check errors are contributing to higher costs and barriers for quality rental housing. The reports, containing an analysis of more than 24,000 complaints, highlighted the challenges that renters face when background information from the tenant screening side contains largely invalidated information. The CFPB, working alongside the Federal Trade Commission (FTC), asserted that the tenant screening industry must be held accountable for such inaccurate, outdated, or false information.
The data shows that people have been denied rental housing because of information belonging to another party, outdated information remaining on reports, and inaccurate or misleading details about arrests, criminal records, and eviction records that are not corrected nor removed. It is also difficult for renters to fix these inaccurate records. In particular, the two reports identify the following issues:
There is questionable relevance for some background check content, especially when prior rental payment history is overwhelmingly not reflected in the reports or algorithmic risk scores assigned to tenants;
Corporate landlords rely on automated property management systems to substitute a single algorithmic score for a more holistic evaluation of prospective tenants, which were historically performed by smaller landlords and property managers;
Renters are often forced to pay for the background check reports but have little to no visibility into the information they contain prior to a rental decision being made, and are further offered little to no recourse when the information is wrong, misleading, or outdated;
Tenant screening companies appear incline to include negative information on a report, even If it is inaccurate, and;
Many landlords do not consistently inform prospective tenants of their right to dispute information in reports or provide them the information necessary to do so as required by the Fair Credit Reporting Act, leaving renters unable to address potential report errors.
The reports showed approximately 26,700 complaints regarding tenant screening from January 2019 through September 2022, with the volume of complaints increasing each year. It can be expected that the CFPB will further monitor the industry to hold tenant screening companies accountable.
CFPB tenant reports: