| **Using Consumer Reports:         What Landlords Need to Know**
If you're a landlord, you     may use consumer reports to evaluate rental applications - as long as you     follow the provisions of the Fair Credit Reporting Act (FCRA). The FCRA is     designed to protect the privacy of consumer report information and to     guarantee that the information supplied by consumer reporting agencies (CRAs)     is as accurate as possible. The FCRA requires landlords who deny a lease     based on information in the applicant's consumer report to provide the     applicant with an "adverse action notice."

**What is a Consumer     Report?**

A consumer report contains information     about a person's credit characteristics, character, general reputation, and     lifestyle. A report also may include information about someone's rental     history, such as information from previous landlords or from public records     like housing court or eviction files. To be covered by the FCRA, a report     must be prepared by a CRA - a business that assembles such reports for other     businesses. The most common type of CRA is the credit bureau.

Landlords often use consumer reports to     help them evaluate rental applications. These reports include:
-  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; andA 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.
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; andRaising 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; anda 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 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.

The adverse action notice must name the     CRA that provided the report to the landlord, even if the information came     from another CRA. For example, a report from XYZ TenantScreen includes a     credit report from ABC Credit Bureau. The credit report includes negative     information that prompts the landlord to turn down the rental application.     The adverse action notice should name XYZ TenantScreen as the CRA because     XYZ TenantScreen actually provided the report to the landlord. The notice     also can explain that XYZ TenantScreen got the credit information from ABC     Credit Bureau, but that is not required under the FCRA.

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

**Take the Case of...**

1. A landlord who orders a consumer       report from a CRA. Information contained in the report leads to further       investigation of the applicant. The rental application is denied because       of that investigation.

Since information in the report       prompted the adverse action in this case, an adverse action notice must be       sent to the consumer.

2. An applicant with an unfavorable       credit history, like past-due credit accounts, who is denied an apartment.       Although the credit history was considered in the decision, the       applicant's poor reputation as a tenant in his current location played a       more important role.

The applicant is entitled to an adverse       action notice because the credit report played a part, however minor, in       the denial.

3. A person with an unfavorable credit       history, like a bankruptcy, but no other negative indicators, who applies       for an apartment. Rather than deny the application, the landlord offers to       rent the apartment, requiring a security deposit that is double the normal       amount.

The applicant is entitled to an adverse       action notice because the credit report influenced the landlord's decision       to require a higher security deposit from the applicant.

4. A landlord who hires a       reference-checking service to verify information included on a rental       application. Because the service reports that the applicant does not work       for the employer listed on the application, the rental application is       denied.

The applicant is entitled to an adverse       action notice. The report is a consumer report from a CRA (the agency       checking the references provided by the consumer on the application), and       its report influenced the landlord's decision to deny the application.

5. A landlord who makes it a practice       to approve an application if the prospective tenant shows an adequate       income or has a favorable credit report, is dealing with an applicant who       has an inadequate income and a bad credit report.

The applicant is entitled to an adverse       action notice because the credit report influenced the denial, even though       income was another factor.

**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.

**For More Information**

If you have questions about the FCRA or     would like a copy of the Act, call toll-free, 1-877-FTC-HELP     (1-877-382-4357). You also can find the Act online at    www.ftc.gov. Click on     Business Guidance.

**Your Opportunity to     Comment**

The Small Business and Agriculture Regulatory     Enforcement Ombudsman and 10 Regional Fairness Boards collect comments from     small business about federal enforcement actions. Each year, the Ombudsman     evaluates enforcement activities and rates each agency's responsiveness to     small business. To comment on FTC actions, call toll-free 1-888-734-3247.
The FTC works for the consumer to       prevent fraudulent, deceptive and unfair business practices in the       marketplace and to provide information to help consumers spot, stop and       avoid them. To file a       complaint or to get free information       on consumer issues, visit www.ftc.gov or       call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The       FTC enters Internet, telemarketing, identity theft and other fraud-related       complaints into       Consumer Sentinel, a       secure, online database available to hundreds of civil and criminal law       enforcement agencies in the U.S. and abroad. **FEDERAL TRADE COMMISSION****FOR THE CONSUMER****1-877-FTC-HELP****www.ftc.gov**
*December2001*UBLIC "-//IETF//DTD HTML//EN"> |
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