CFPB Reports Highlight Problems with Tenant Background Checks: A Rebuttal
This week, the Consumer Financial Protection Bureau (CFPB) issued two negative reports on the tenant background check industry. These reports describe an industry that is everything the American Apartment Owners Association (AAOA) strives diligently not to be.
For nearly 20 years, AAOA has been dedicated to providing equality and fairness to both the landlord and tenant while ensuring that all parties receive the same excellent level of service.
With the increasing frequency of rental application fraud, it is imperative that landlords receive reliable tenant screening information to protect their property and their investment.
At the same time, the applicant needs to be protected from misinformation about their credit and personal history. If inaccuracies appear in their reports, they need to be given the opportunity to correct them.
The following is a breakdown of the points made in the two CFPB reports and our response to them:
- “Tenant background check content for landlords has questionable relevance, particularly given the lack of rental payment history.”
Tenant screening reports lack rental payment history because credit bureaus did not want to collect the data and there was no effortless way for property owners to report it. Thanks to the CFPB and modern technology, credit bureaus now understand its importance and landlords can now more easily report rental payment histories.
At AAOA, we endorse the practice of reporting a tenant’s rental payments to the credit bureaus. A renter typically pays a large percentage of their income in rent throughout the year and that fact should be reflected in their credit report and score. Many of our webinars encourage landlords to report monthly rental payments or lack thereof.
- “As corporate landlords have increased their rental holdings, the demand for digital, algorithmic scoring of prospective tenants has increased.”
AAOA does not provide algorithmic scoring of prospective tenants. Instead, we encourage our members to thoroughly look at the renter’s entire tenant screening background report. While much of the rental process is automated, nothing beats a set of eyes for accurate reviewing of an application. If negative information is found during the review process, our members are encouraged to discuss the problem with the applicant. Often, negative information on a credit report can be explained away. We view the report as an opportunity to get to know the tenant better and understand their background. We never tell a landlord whether they should rent to someone or not. The final decision is always theirs.
- “Renters pay for the reports, but often do not see them, and struggle to get errors fixed. “
AAOA applicants are offered copies of their completed credit and background screening reports so they can review them for any information that may be inaccurate .
- “Market dysfunctions result in companies selling erroneous data to landlords.”
Thanks to AAOA’s strategic partnerships for the most accurate tenant screening information available, we only receive disputes from approximately .06% of applicants. This is due to the fact that our providers help to ensure if information might be inaccurate, it is excluded from the report.
- “Renters often do not receive adverse action notices, a legal right for renters.”
AAOA provides free adverse action letters for landlords who deny applicants. These letters, which are required under the FCRA, detail how to dispute any inaccuracies. AAOA’s third party tenant screening provider will also assist the applicant in clearing up any questionable data.
Our members demand transparency and accuracy when they order a tenant background screening from AAOA. It is our mission to supply them with reports they can trust so that they are able to make informed and fair decisions about who they are going to trust with their investment property.