Denial Of Application To Rent Letter for Potential Tenants
Question
Is there a particular format required for Denial of Application to Rent letter?
Answer
The actual name of the document required under the federal Fair Credit Reporting Act (FCRA) is “Adverse Action Notice” and the notice is only required when the landlord uses a “consumer report” as defined under FCRA.
An adverse action is any action by a landlord that is unfavorable to the interests of a rental applicant. It includes not only a landlord’s denial of a rental application but also a landlord’s action that imposes a burden not required of all tenants. Common adverse actions by landlords include:
- Denying an 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 raising the rent to a higher amount than for another applicant
The circumstances of a rejection determine what you must do by law to notify an applicant that his application has been rejected.
To be covered by the FCRA a report must be prepared by a credit reporting agency (CRA). The most common type of CRA is the credit bureau. Landlords using consumer reports for evaluation of rental applicants must follow the provisions of the Fair Credit Reporting Act (FCRA).
Whether verifying employment and previous landlord references is covered by the FCRA depends on who does the verification. A reference verified by the landlord or 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.
The landlord must provide the notice if the adverse action in any way is based on a consumer report that played a factor in the landlord’s action, even though its action is based primarily on an applicant’s income or prior reputation as a tenant.
Although there is no set format for the notice, a notice of the adverse action provided to the consumer must include:
- The name, address and telephone 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, and
- A 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.
Although the law can be interpreted to allow oral adverse action reports, it is best to mail an adverse action letter to the rejected applicant using the USPS with a Certificate of Mailing to prove it was sent.
Landlords who fail to provide required disclosure notices potentially face legal consequences. The FCRA allows individuals to sue landlords for damages in federal court. 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 can demonstrate “that at the time of the violation he maintained reasonable procedures to assure compliance” with the FCRA.
The above discussion relates only to federal law. As for many property management issues, landlords must also understand and abide by any more restrictive consumer credit laws that might exist in their particular states.