Be Fair Credit Reporting Act (FCRA) Compliant
- You need a permissible purpose. For the multifamily industry, that generally means that you can only obtain a consumer report in connection with a lease application or an attempt to collect a bad debt. Other permissible purposes also include the use of information for the extension of credit or the review or collection of an account, for employment purposes and for underwriting of insurance. FCRA Section 604.
- Signed authorization from the applicant and keep it on file. Although the law states that you do not need a signature if you have a permissible purpose, a signed authorization form provides you with an additional level of security. The authorization can either be incorporated within the rental application or on a separate form. The authorization should inform the consumer of the information that will be reviewed in the leasing decision.
- A letter sent to any applicant with whom you have taken an "Adverse Action". Adverse action does not just include denying a consumer's application for an apartment, but also includes any action that negatively affects the consumer. For example: requiring a guarantor if not required of other applicants; or not providing an applicant with promotional offers such as a free month of rent.
The adverse action or declination letter must contain the following information: the name and address of the consumer reporting agency that issued the report; a statement that the consumer reporting agency did not make the decision to take adverse action; notice of the consumer's rights to obtain a free copy of the report within 60 days of the adverse action and the consumer's rights to dispute the accuracy and completeness of the information with the consumer reporting agency. FCRA Section 603(k). Landlord2Landlord generates an "adverse action" or “declination letter” by selecting the letter option at the bottom of the application order screen. You may also use your own "adverse action" or consumer “declination letter”.
- You are permitted to give an applicant a copy of their consumer report. The FCRA does not prevent you from providing a copy of the report to the consumer if asked. In many cases though, the consumer will not be able to understand the report because they are unfamiliar with the information. Therefore, we advise you to have the consumer contact the consumer-reporting agency for a copy and assistance.
- You are allowed to discuss and show the applicant their consumer report. If the contents of the consumer report lead to an adverse action, your company has the option to discuss the contents of the consumer report with the applicant as it relates to the decision. You may discuss specific items or problems on the consumer report. If possible, the discussion should be limited to the information that led to the decision. FCRA Section 607(c).
- You cannot consider data that is more than seven years old. Under the FCRA you are not allowed to consider credit and eviction record history that is reported by more than seven (7) years when evaluating an applicant. Consumer reporting agencies will not provide older information except in the case of conviction of crimes and certain bankruptcies that can be reported for up to ten (10) years. FCRA Section 605.
- You cannot request a consumer report on yourself. Using your subscriber account number to access information on oneself is not a permissible purpose under the Fair Credit Reporting Act (FCRA). To do so would place you in violation of the FCRA, and you would be liable to the consumer reporting agency for actual damages sustained by the consumer reporting agency or a $2,500 fine, whichever is greater.
- Consumer reports should be held in the strictest confidence. Security is very important. Access to the reports should be limited only to those employees who need to have access and have been properly trained. Additionally, consumer reports must be kept in an area that is secure or locked.
- Passwords and access codes to consumer report software should be maintained regularly. Passwords and codes used to access consumer report software should not be posted on or near your computers and should be changed on a regular basis. Passwords of employees who leave the company and had access to consumer reports should be deactivated immediately.
- Employees should be trained on the Fair Credit Reporting Act (FCRA). Employees who have access to consumer reports should be trained on the sensitive nature of consumer information and the civil and criminal liability for misuse of this information. These issues should be an integral part of your company's training process.
To Stay Fair Housing Law Compliant:
- Make sure everyone in your leasing office is knowledgeable about the Fair Housing Laws. Training is the best way to prevent staff from violating Fair Housing Laws or discriminating against prospective applicants. Some good resources for Fair Housing training are video and audiotapes on the subject and guest speakers sponsored by your local apartment association.
- Keep a time log of all contacts and phone calls related to prospective applicants. Write down the date and time of all phone calls and visitors with a brief description of the conversations. If someone calls in the morning looking for an apartment that doesn't become available until later that afternoon, the time log is a reference showing that you didn't discriminate by withholding information.
- Don't steer applicants towards one apartment or make recommendations. Although it is human nature to want to be helpful, it is discriminatory to recommend to a family with children an apartment on the first floor or in a special building with other families.
- Know the seven nationally protected categories. It is illegal to discriminate against any person because of race, color, religion, sex, handicap (disability), familial status, or national origin.
- Know your local protected categories. Every state and many local governments have additional anti-discrimination laws. Contact your local apartment association or government office for further guidance.
- Document your resident screening criteria policy based on allowable categories. Create a "policy file." Criteria can set requirements in categories such as credit, income, length of employment, residence history, check history, and criminal history. Be specific in your description. For example, applicants with between 40%-50% rent to income ratio are accepted with an extra $200 security deposit.
- Avoid making exceptions to your selection criteria. Be consistent and firm with your selection, making sure to follow policy. Do not make exceptions because you "feel good" about that person or they tell a sad story. Discrimination occurs when you make exceptions and deviate from your policy.
- Make the same offers to everyone. For example, if an applicant applies for an apartment but doesn't quite make enough money, you may decide to accept them if they have a qualified guarantor/co-signer. The same offer must be available to every applicant with a similar situation.
- Document all applications, decisions and reasons. Always explain clearly to the applicant the reasons for your decision. Send a letter with the reasons clearly stated. If the reasons are based on information received from a consumer-reporting agency, you are required by the FCRA to send an "adverse action" or a declination letter. Keep a copy of the letter with your signature in your files.
- Use an outside source to provide information to make leasing decisions. Using an outside resource such as a consumer reporting agency can provide a source of consistent and documented critical decision-making information to assist in Fair Housing compliance.
- Consult with legal counsel. Ask your legal counsel to review your proposed resident screening criteria and other policies.