A.) The Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) requires owners and operators who use consumer reports to conduct rental history checks or credit checks on applicants to identify themselves to the consumer reporting agency, certify the purposes for which they are seeking the information, and certify that they will use the information for no other purpose. (15 U.S.C. § 1681e(a).)
Because the FCRA limits the circumstances under which an owner or operator may request and use a consumer report, an owner or operator always should obtain written consent from the applicant to request and use his/her consumer report. (15 U.S.C. § 1681b(a),(c).) Written consent from the applicant will protect the owner or operator so long as the consumer report is used in connection with the business transaction between the owner or operator and the applicant, which business transaction can be established by requiring the applicant and any co-signer to sign a lease application, as applicable.
A user may not request a consumer report for a permissible use but then use the report for an impermissible purpose. Several federal courts have found that an improper request creates a civil right of action against the user. Additionally, a person who knowingly and willfully obtains information on a consumer from a consumer reporting agency under false pretenses – which is defined as any purpose not permitted by the FCRA – may be fined up to $5,000 (for a first offense), imprisoned up to two years, or both. (15 U.S.C. § 1681q; 18 U.S.C. § 2B1.1.)
If an owner or operator rejects an applicant or approves him/her subject to higher-than-normal conditions (e.g., requiring a higher security deposit; requiring a co-signer on the lease; or raising the rent to a higher amount) because of adverse information in a consumer report, the owner or operator must:
- Provide oral, written, or electronic notice of the adverse action to the consumer;
- Provide to the consumer written or electronic disclosures of a numerical credit score used in taking any adverse action based in whole or in part on any information in a consumer report and the following information –
a. the range of possible credit scores under the model used;
b. all of the key factors that adversely affected the credit score, which shall not exceed four key factors, except that if one of the key factors is the number of inquiries made concerning the consumer report, the number of key factors shall not exceed five;
c. the date on which the credit score was created, and;
d. the name of the person or entity that provided the credit score or credit file upon which the credit score was created; - Provide to the consumer orally, in writing, or electronically—
a. The name, address, and telephone number of the consumer reporting agency from which it received the information (including a toll-free telephone number established by the agency, if the consumer reporting agency maintains files on a nationwide basis), and;
b. A statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken, and; - Provide to the consumer an oral, written, or electronic notice of the consumer’s right to obtain a free copy of the consumer report from the consumer reporting agency within 60 days of receiving notice of the adverse action, and the consumer’s right to dispute the accuracy or completeness of any information in the consumer report with the consumer reporting agency. (15 U.S.C. § 1681m(a)(1)- (2); 15 U.S.C. § 1681g(f)(1).)
Suppose an owner or operator uses adverse information from a source other than a consumer reporting agency and that information either wholly or partially bears upon the consumer’s creditworthiness and character. In that case, the owner or operator must disclose the nature of such information to the consumer within a reasonable time after the consumer’s written request for the reasons for the adverse action received within 60 days of learning of such adverse action. (15 U.S.C.S. § 1681m(b)(1).) The owner or operator clearly and accurately must disclose to the consumer the right to make such a written request at the time s/he communicates the adverse action to the consumer.
Owners and operators are not liable for failing to adhere to the FCRA’s notice procedures after taking an adverse action if they have maintained reasonable procedures to comply with such provisions. (15 U.S.C. § 1681m(c).) There is civil liability, including actual damages, for negligently failing to comply with any provision of the FCRA, and punitive damages may be assessed for willful noncompliance. (15 U.S.C. §§ 1681n, 1681o.)
Finally, an owner or operator must dispose of all consumer reports in a manner that prevents identity theft. Acceptable methods include shredding the report thoroughly, burning it, or otherwise destroying or obliterating it.
B.) Reporting Resident Payment Information
If an owner or operator falsely reports a resident’s credit payment history, s/he may be liable for defamation and/or invasion of privacy. A statement is defamatory when it tends to hold a person up to hatred, contempt, or ridicule; when it causes the person to be shunned or avoided; or when it tends to injure a person’s reputation or to diminish the esteem, respect, goodwill or confidence in the person, or to excite derogatory feelings or opinions about the person. To recover in a defamation action, a plaintiff must prove the statement was defamatory, false, and not privileged.
The FCRA provides limited protection for owners and operators. To bring any action for defamation, invasion of privacy, or negligence concerning the reporting of information, a consumer must show that the owner or operator falsely furnished the information with malice or willful intent to injure. (15 U.S.C. § 1681h(e).) A qualified privilege also may exist as a defense to a defamation action. When a communication is made in good faith on any subject matter in which the party making the communication has an interest, or in reference to which s/he has a public or private duty (either legal, moral or social) and is made to a person having a corresponding interest or duty, a qualified privilege may exist to avoid litigation, owners and operators must exercise great care in reporting the resident’s name for the delinquent debtors list.
Keywords: screening, credit score