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Tenant Screening
Tenant screening is a process used primarily by residential landlords and property managers to evaluate prospective tenants. The purpose is to assess the likelihood the tenant will fulfill the terms of the lease or rental agreement. The process culminates in a decision as to whether to approve the applicant, approve the applicant conditionally (such as requiring an increased deposit or cosigner) or deny tenancy.

Tenant Screening Process
The tenant screening process typically begins when the prospective tenant (each adult applicant) completes a rental application, pays an application fee and perhaps a holding deposit.

Rental applications are designed to collect personally identifying information (name, social security number and date of birth, etc.), address, employment, criminal and eviction history. A signature is generally required, attesting to the accuracy of information provided, agreeing to certain terms and conditions and authorizing procurement of a tenant screening report.

Valid government issued photo identification is typically required to confirm the identity of applicants and in compliance with the Federal Trade Commission's (FTC's) identity theft Red Flags Rule.

Most landlords rely on a tenant screening company to produce a tenant screening report - to compile relevant credit, public records and other information needed to adequately vet prospective tenants. Information gleaned from the application, tenant screening report and the landlords own research is used to arrive at a decision based on landlord's rental criteria.

Tenant Screening Companies
Tenant screening services are specialized consumer reporting agencies (CRA's) or investigative consumer reporting agencies as defined and regulated by the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq.

CRA's have many obligations under the FCRA. Notably,they must establish the identity of each end-user (landlord) and the purpose for which the information is sought - before providing a tenant screening report.
 * They must "follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates".
 * "Upon request, and subject to section 610(a)(1)of the FCRA (§ 1681h), clearly and accurately disclose to the consumer "all information in the consumer's file at the time of the request." Failure to do so can result in strong regulatory action.  See http://www.ftc.gov/opa/2010/02/saferent.shtm.
 * Additional CRA compliance procedures are outlined in Section 607 of the FCRA (15 U.S.C. § 1681e).

Applicant initiated (direct-to-consumer) tenant screening services are beginning to emerge. These services differ from the above (traditional) model in that the consumer (applicant) orders the report on themselves and shares it with the landlord (or landlords) of their choice.

Tenant Screening Reports
Tenant screening reports contain one or more of the following elements:
 * Consumer credit report (with or without a score) - from one of the three national credit bureaus (Experian, Equifax or Transunion).
 * Eviction records search
 * Criminal records search
 * Sex offender registry search
 * Specially designated nationals search (frequently referred to as an OFAC search)
 * Rental references
 * Employment verifications
 * Recommendation - based on the landlords criteria (parameters)

Credit reports and database searches are often returned instantly via secure web sites. Additional information resulting from more in-depth public records searches, rental references and employment verifications can take anywhere from a few hours to a few days.

Landlord Responsibilities
Landlords are Users of Consumer Reports, also as defined and regulated by the FCRA. The FCRA imposes specific requirements on landlords as Users. Notably, they must "…provide oral, written, or electronic notice of adverse action taken based in whole or in part on any information contained in a consumer (tenant screening] report. Adverse action is determination that is adverse to the interest of the consumer.  Certainly denial of tenancy is an adverse action.  But so to is attaching additional terms, such as requiring an additional deposit or co-signer.  The notification must include:
 * The name, address and telephone number of the consumer reporting agency (tenant screening company] that furnished the report; and
 * The consumer's right to a free copy of the tenant screening report; and
 * The consumer's right to dispute the accuracy and completeness of the report.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) amended Section 615 of the FCRA to add a new requirement that a person (landlord) taking Adverse Action… “provide to the consumer written or electronic disclosure (A) of a numerical Credit Score as defined in section 609(f)(2)(A) [of the FCRA] used by such person in taking any Adverse Action based in whole or in part on any information in a consumer report; and (B) of the information set forth in subparagraphs (B) through (E) of section 609(f)(1),” including:
 * Numerical Score
 * Score Range
 * Score Factors
 * Score Date
 * Score Source

Tenant Screening and the Law
There is a substantial body of law regulating consumer reporting. The FCRA, 15 U.S.C. § 1681 et seq. as amended by the Fair and Accurate Credit Transactions Act of 2003 (FACTA) and more recently by Dodd-Frank is the primary body of law regulating consumer reporting. Many states have laws regulating consumer reporting as well. Section 625 of the FCRA (15 U.S.C. § 1681t) addresses the Relation (of the FCRA) to State laws by stating that "…this title does not annul, alter, affect, or exempt any person subject to the provisions of this title from complying with the laws of any State with respect to collection, distribution, or use of any information on consumer, …except to the extent that those laws are inconsistent with any provision of this title…". Federal law is said to pre-empt state law to the extent of any inconsistencies.

Dodd-Frank transferred regulatory authority over consumer reporting (and therefore tenant screening companies) from the Federal Trade Commission (FTC) to the new Consumer Financial Protection Bureau in 2011.

Federal and state fair housing and residential landlord-tenant law impact the tenant screening process in several ways. It is, in a nutshell, a violation of fair housing law to treat protected individuals differently in the tenant screening process. Fair housing law at the federal level is found in Title VIII of the Civil Rights Act of 1968. Residential landlord-tenant law often limits what landlords may charge for tenant screening to the actual costs in obtaining the background information, not to exceed the customary costs charged by a screening service in the general area.

Legal and Legislative Trends
Fair housing advocates are beginning to promote application of the disparate impact legal theory (historically applied to employment practices) to bring discrimination claims against landlords. They argue that people of certain races and ethnicities are disproportionately represented in the criminal justice system and therefore use of criminal records for tenant screening purposes has a disparate impact on those individuals. Countering that argument is the right and obligation of landlords to protect themselves, their residents and the community from those who commit serious crimes against persons or property.

This debate is far from settled. http://www.yalelawjournal.org/images/pdfs/539.pdf That said, many landlords are taking steps to reduce their exposure to disparate impact claims by limiting use of criminal records to convictions (versus records of arrests) and to specific offenses (which are on their face relevant to the tenancy). Note the section 605 of the FCRA prohibits CRA's from reporting records of arrest and evictions which from the date of final disposition antedate the report by less than seven years. Several states similarly limit reporting of conviction records.

References

Pprudente (talk) 22:25, 29 December 2011 (UTC)