What is considered a consumer report? What is an Adverse Action?
Landlords use consumer reports in evaluating and selecting tenants for their rental properties. A consumer report contains information about an individual’s credit, character, general reputation, and lifestyle. As a tenant background check, consumer reports can include rental history, eviction history, credit history, or criminal records.
Consumer reports are usually prepared by a credit bureau or other credit reporting agency (CRA) and are covered under requirements of the Fair Credit Reporting Act (FCRA).
When a landlord uses a consumer reports to make tenant decisions, the landlord must comply with the FCRA requirements.
Examples of consumer reports include:
- credit reports from a credit bureau, such as TransUnion, Experian, and Equifax or an affiliate company,
- reports from a tenant screening service that describe the applicant’s rental history based on reports from previous landlords or housing court records,
- reports from a tenant screening service that describe the applicant’s rental history and also include a credit report the service got from a credit bureau,
- reports from a tenant screening service that is limited to a credit report the service got from a credit bureau, and
- reports from a reference checking service that contains previous landlords or other parties listed on the rental application on behalf of the rental property owner.
If an applicant does not meet the landlord’s rental standards (screening criteria), a landlord can reject the application or may accept the application with conditions.
A landlord’s decision to deny tenancy or approve the applicant with different terms and conditions requires the landlord to notify the applicant using an Adverse Action Notice. Consumer reports may contain misleading, incomplete, or inaccurate information, such as information relating to eviction or other court records. An adverse action notice explains to the applicant his rights to see information being reported about him and an opportunity to correct inaccurate information.