The Federal Trade Commission (FTC) recently announced guidance for landlords, property managers, and others who require background checks on potential tenants. The tenant screening reports often contain information such as rental and eviction history, criminal history, and credit history.
The guidance reminds housing providers, “Background checks from consumer reporting agencies are consumer reports, and under the law, [they] have certain responsibilities when it comes to using them.” It also clarified that individuals or businesses could obtain consumer reports only for permissible purposes. In addition, it stressed that they must use the consumer report for that purpose only, emphasizing no further uses.
The FTC also clarified what qualifies as “adverse actions.” For example, the agency revealed that adverse actions include using information from a consumer report, however briefly. Denying housing to an applicant or asking for a different deposit amount due to a consumer report also counts as adverse actions.
The Fair Credit Reporting Act (FCRA) presides over adverse actions and requests for reports from consumer reporting agencies (CRAs). It requires housing providers to notify the applicant in an adverse action notice. The notice can be electronic, oral, or written. It must contain the following.
The adverse action notice must inform individuals of their right to access the information in the consumer report. It allows consumers to review the report’s contents. In addition, this report would allow consumers to dispute the details if they find misinformation or inaccuracies.
The guidance suggests supplying the consumer with adverse action notices in writing. This recommendation is because written notices benefit the housing provider and applicant. For example, housing providers may use it as physical proof of compliance. In addition, applicants may use it to assert their rights when requesting a copy of their consumer report from the CRA that supplied it to the landlord. It also helps the dispute process when applicants challenge errors in their reports.
Similar to housing providers, employers must comply with the FCRA. Compliance includes providing an adverse action notice when taking related actions. Examples of adverse actions include denying employment or a promotion based on a consumer report. The best way to ensure compliance during the hiring process is to partner with an experienced background check company.
Pre-employ offers free resources to help you stay compliant in your hiring practices. Check out our guide on 5 Tips To Avoid FCRA Non-Compliance to keep your company up-to-date.