The Consumer Financial Protection Bureau (CFPB) recently issued two reports examining the tenant background check industry maintain errors often result in increased costs and quality rental housing barriers.
The CFPB report findings stem from the agency’s analysis of over 24,000 complaints highlighting renter challenges connected to the industry’s failure to remove incorrect, old, or misleading information and provide adequate investigations of the disputed information.
“When a company produces a tenant background check report that is riddled with errors, it can cause serious harm to a family seeking housing,” CFPB Director Rohit Chopra said. “These background reports are heavily used by corporate landlords that own an increasing share of rental housing in our country, so we are taking steps to ensure these reports do not contain false information.”
Per the CFPB, tenant background checks are often filled with unvalidated information of uncertain accuracy or predictive value, with renters shouldering the costs of errors and false information while having few avenues to make tenant screening companies fix their procedures.
The tenant background check industry crafts reports that include personal information such as credit history, civil and criminal records, and credit scores, in addition to proprietary risk scores, some landlords and property management companies base their decision to rent to a prospective tenant.
The CFPB reports showed amid corporate landlords increased rental holdings, the demand for digital, algorithmic scoring of prospective tenants has increased; renters pay for the reports but often do not see them and struggle to get errors fixed; and although a legal right for renters, they often do not receive adverse action notices.
CFPB collaborated with the Federal Trade Commission (FTC) as a means of holding the tenant screening industry accountable.