Landlords: Are YOU breaking the law?

Landlords: Are YOU breaking the law?

Brandon TurnerPro Member
Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes

http://business.ftc.gov/documents/bus49-using-consumer-reports-what-landlords-need-know

Hey everyone,

So I read this online today, and am wondering if others are properly following the law when screening tenants? I'm going to write up a blog post on the subject, so I'm just gathering info right now and doing my research. So any or all advice,discussion, etc is welcome.

Basically, the government says (if I'm reading this right) that if you deny a tenant based on something you discovered in their screening - whether it came from their credit report or not - you have to follow some very specific protocol and send them:

1.) the name, address and telephone number of the CRA that supplied the consumer report, including a toll-free telephone number for CRAs that maintain files nationwide;
2.)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
3.) 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.

According to this document, even if you require an additional security deposit - you still need to give them this information.

So anyways - I'm just trying to see what others are doing (or aren't doing) to comply with this?

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Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
13y

I called 800# on that site. After pressing '1' for English and navigating the maze of directory options, I finally gave up and started pressing '0' until it said I was being transferred to a low paid hourly worker who would not understand my question, her job, and absolutely would be of no help to me.

So Ms. Gubment-Worker gets on the phone and tells me I should contact my state Attorney General because my state may have different laws. I then told her it was legal to grow and smoke pot in my state, but the Federal Gubment likes to send out officers to harass and arrest citizens of my state for doing something perfectly legal under our state constitution. Realizing that Obama might be listening in, I quickly jumped on the bandwagon and said I don't support that lifestyle or approve of it, I am just using that as an example because I thought that Federal Law superseded state law. I think I then heard him snicker.

She told me in some cases it does, in others it doesn't. She then gave me the number to my states Attorney General.

I then called the number she gave me, 800.952.5210, '1' for English, '4' for Landlord-Tenant dept. I got a voicemail telling me that I needed to go to their website for more information or I could press '2' if I do not have internet access. I pressed 2. A very rude little man with a big attitude picked up the phone. He asked me what county I am in. I told him and he said they do not answer any landlord-tenant questions and that I should contact my county office. I attempted to explain what I wanted to ask, but he spoke over me and said I should contact my county because he would not answer my questions. Ouch!

I then called my county office using the number Mr. Gubment-Worker-Superiority-Complex gave me, 951.682.6581 and got Fair Housing. She was blunt and to the point. If I don't charge an upfront fee, even if I pull their credit, I don't have to send no stinkin' letter.

I think I hear a knock on my door & what's this Homeland Security car doing in my driveway....

See this reply in the discussion

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  • Brandon TurnerPro Member
    OP
    Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
    13y

    Ben Leybovich - thoughts?

  • Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
    13y

    Yes - this is what I do. It is a must. But you'll have trouble with this since YOU ARE NOT THE OWNER - got you good this time :)

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y
  • Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    13y

    Yes, if they are denied. Charging an additional security deposit implies to be that they are accepted under terms agreed to, that isn't a denial.

    Remember too, that if you get a credit report you can't give them a copy of it.

    There are usually form letters for the notices required, check a box type for a rejection. :)

  • Brandon TurnerPro Member
    OP
    Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
    13y

    What I find interesting is that, according to that document, even if you reject someone because they make $0 income or they have 9 PitBulls - you still have to jump through the hoops even if the credit report had absolutely nothing to do with it. I'd never heard of that! Thoughts?

  • Brandon TurnerPro Member
    OP
    Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
    13y

    And Ben Leybovich I think this rule applies for both owners AND managers ;)

  • Real Estate Investor · Englewood, CO · Member since 2013 · 988 posts · 258 votes
    13y

    There are many, many laws being broken by many owners and propperty managers. Some are as simple as the way you advertise. Others are suggesting a yield on an investment, which can open a huge can of worms, including advertising an unregistered security.

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y
    Originally posted by Bill Gulley:
    Yes, if they are denied. Charging an additional security deposit implies to be that they are accepted under terms agreed to, that isn't a denial.

    ...

    Bill Gulley - sorry, but that is not how the law is worded. It is any ADVERSE outcome to the applicant that requires the notice under the law. So a higher deposit is adverse to the applicant, and requires the notice under the law. Just like a higher interest rate on a loan is adverse to the applicant, and requires the notice under the law. Just read the link that was in the OP for other examples.

  • Houston, TX · Member since 2013 · 51 posts · 22 votes
    13y

    My prescreening weeds everyone out before a credit report was even pulled or application fee charged. I also don't show the property until they have past my checks. At that point I ask if thy want to proceed and then they pay fees.

    The packets at the property and ones I email clearly line out what will disqualify them and what is required for income, work hx, rental hx, criminal. Along with the packet is pictures of every room and answers to almost every question they might have. This cuts down on phone calls and showing the property to unqualified applicants.

    I can check the county criminal for free, make a few phone calls for work history and rental verification. I do this at different times as different people for different reasons to catch any trickery. I then do a little research on the person that is verifying the info. I make sure that they are the actual property owners or managers. It's amazing what people post publicly on Facebook that tells a lot about their situation. The few that I have denied never made it to the showing or formal credit criminal check stage. The application authorizes and releases me to do everything I just stated. And yes the ones that were denied I sent a letter stating the reason and wish them good luck in their housing search. I keep every piece of paperwork and correspondence.

    So I'm rejecting applicants without even
    pulling a credit report. How can I provide them CRA info and numbers when it wasn't a factor. I'm not extending them credit with the rental because they pay each month in advance.

    Am in violation of any law?

  • Los Angeles, CA · Member since 2013 · 555 posts · 261 votes
    13y

    "The adverse action notice is required even if information in the consumer report was not the main reason for the denial, "

    It says nothing about if the credit report played NO role in denial, or if credit report was not even retrieved.

    Many landlords reject applicants before pulling credit reports.

    I think this information only applies to those landlords who have already pulled credit checks.

  • Investor · -, IL · Member since 2010 · 409 posts · 616 votes
    13y

    I am in the same boat as Doss. I do the screenings myself and have never used a CRA. It may come back to bite me in the butt one day but I don't even look at credit reports. I search the local courthouse records, google, call landlords, call references and employers etc. If I deny someone I send them a letter saying why and keep all documentation.

  • Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
    13y

    I spoke to the AOA about this a while back. They said as long as you don't charge an up front application fee, all you have to do is tell the prospect they do not meet the owners criteria and no further explanation is required. I had only one person send me an email asking for more clarification, so per what AOA stated, I deleted it and never heard from that person again.

    I don't charge an up front application fee. By the time I pull credit, I've already checked everything else out and I'm sure it is the person I want to lease to. If something turns up on their eviction report or credit, then I eat the few dollars I spent and move on to the next person. If everything checks out, I charge the application fee with the move in money (1st & sec deposit). It's been working well for 10+ years.

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y
    Originally posted by Doss Mann:
    ... I'm not extending them credit with the rental because they pay each month in advance.
    ...

    It's not about whether you are extending them credit or not - it's that you are using a "report" (see the link in the OP for how a "report" is defined). If you get a "report" from a business that compiles such "reports", then you are obligated to provide the applicant a notice of any adverse outcome.

    Now, some might debate that you are extending credit to a tenant, by giving them use of a property that has a value of many thousands for a deposit of some much smaller amount - but that has no bearing on the point I made previously. I've had applicants (yes more than one) refuse to allow me to pull credit reports (denied on the spot) because "they just had credit pulled to get car loan"; to that I respond that I am giving them use of property that is of greater value than the car ...

  • Houston, TX · Member since 2013 · 51 posts · 22 votes
    13y

    The ony reports I have pulled were for applicants that ended up renting. The extension of credit has been debated both ways I just added that in, and yes that's not what this thread is about.

  • Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
    13y

    I called 800# on that site. After pressing '1' for English and navigating the maze of directory options, I finally gave up and started pressing '0' until it said I was being transferred to a low paid hourly worker who would not understand my question, her job, and absolutely would be of no help to me.

    So Ms. Gubment-Worker gets on the phone and tells me I should contact my state Attorney General because my state may have different laws. I then told her it was legal to grow and smoke pot in my state, but the Federal Gubment likes to send out officers to harass and arrest citizens of my state for doing something perfectly legal under our state constitution. Realizing that Obama might be listening in, I quickly jumped on the bandwagon and said I don't support that lifestyle or approve of it, I am just using that as an example because I thought that Federal Law superseded state law. I think I then heard him snicker.

    She told me in some cases it does, in others it doesn't. She then gave me the number to my states Attorney General.

    I then called the number she gave me, 800.952.5210, '1' for English, '4' for Landlord-Tenant dept. I got a voicemail telling me that I needed to go to their website for more information or I could press '2' if I do not have internet access. I pressed 2. A very rude little man with a big attitude picked up the phone. He asked me what county I am in. I told him and he said they do not answer any landlord-tenant questions and that I should contact my county office. I attempted to explain what I wanted to ask, but he spoke over me and said I should contact my county because he would not answer my questions. Ouch!

    I then called my county office using the number Mr. Gubment-Worker-Superiority-Complex gave me, 951.682.6581 and got Fair Housing. She was blunt and to the point. If I don't charge an upfront fee, even if I pull their credit, I don't have to send no stinkin' letter.

    I think I hear a knock on my door & what's this Homeland Security car doing in my driveway....

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y

    Aaron Mazzrillo - based on my reading of the FCRA, it does not make any mention of whether you charge a fee to obtain the information; it seems to imply that when YOU pay an agency to get information, that you must then comply with adverse action notices. See page 5, subsection (f) in the link provided.

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y

    Here is a summary of FCRA for users of "reports"; most landlords would be such users:

    http://www.ftc.gov/os/2004/11/041119factaapph.pdf

  • Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
    13y

    Well, unless said tenant is going to file a Federal suit against me, I think I will continue doing business as I have. Especially considering what it took me to get an answer. I doubt any lazy tenant is going to go through all that just because I didn't mail him some notice. And, since it is not required to be sent certified return receipt, whose to say I didn't send it out?

    From what I've heard relating to tenant horror stories, they are looking for 1 of 2 things; entry so they can stay, not pay, and screw you out of a year's rent, or a Fair Housing claim. I've never heard of any landlords getting involved in a dispute related to not providing a letter concerning credit.

    Meteors hit the earth quite often, but I don't walk around looking up in the sky in fear that I'll get hit by one.

  • Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    13y
    Originally posted by Doss Mann:
    My prescreening weeds everyone out before a credit report was even pulled or application fee charged. I also don't show the property until they have past my checks. At that point I ask if thy want to proceed and then they pay fees.
    ...
    So I'm rejecting applicants without even
    pulling a credit report. How can I provide them CRA info and numbers when it wasn't a factor. I'm not extending them credit with the rental because they pay each month in advance.

    Am in violation of any law?

    To answer the question, from the FTC link provided above, the Act says "Landlords often ask applicants to give personal, employment and previous landlord references on their rental applications. Whether verifying such references is covered by the FCRA depends on who does the verification. A reference verified 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."

    I am interpreting the "landlord's employee" to include the landlord and members of an LLC where the landlord is a non-person (entity like an LLC).

  • Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    13y

    Can someone explain this? From the original link:

    Non-Compliance with the FCRA

    Landlords who fail to provide required disclosure notices face legal consequences. The FCRA allows individuals to sue landlords for damages in federal court. A person who successfully sues is entitled to recover court costs and reasonable legal fees. The law also allows individuals to seek punitive damages for deliberate violations of the FCRA. 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 or she can demonstrate "that at the time of the . . . violation he maintained reasonable procedures to assure compliance" with the FCRA.

    What is the basis of the suit? In other words, what is the charge, and is it civil or criminal? For those who did or did not charge a fee, what is the basis for "punitive damages"? Seems to me the plaintiff would be required to prove "deliberate violations", and given the last paragraph would need to show the violations were systemic in the landlord's business.

  • Real Estate Investor · Englewood, CO · Member since 2013 · 988 posts · 258 votes
    13y

    Am I understanding from all the posts that the majority are looking for ways to NOT provide a written report to the applicant why they were rejected?

    If it is, it would seem simple to just provide a report at all times and remove the question of being within the law.

    I buy and sell land. I am not required to provide the buyers with a HUD Report. Yet, if find the report very informative and forthcoming for the buyer. So, I created one and provided it to all buyers or potential buyers.

  • Investor · Champaign, IL · Member since 2012 · 22 posts · 0 votes
    13y

    I guess I'm not seeing the big deal here. From the ftc.gov link, it looks to me like:

    The FCRA requires landlords who deny a lease based on information in the applicant's consumer report to provide the applicant with an "adverse action notice."

    And, the consumer report is any report I get from any agency I'm paying for information (my paraphrasing)

    I pay for information on credit scores.

    If I deny a lease based on information I get on a credit report, I do the whole 'official letter' thing. If I deny based on any of the other screening that I do (that I didn't pay any agency for) I'm not required to do the official letter thing.

  • Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
    13y

    Just the other day I received one of these official letters from Wells Fargo because of a refinance they denied me. It states I was denied because of title issues. (The property is in a trust and I would not deed it out of the trust until they had funded. After we closed, I would deed it back into the trust, which they also did not like.)

    The letter has an 888 number I can call "if I have any questions regarding this notice." Regardless of the time of day I call, the voice mail says "Our office hours are 8am to 5pm central time, Monday thru Friday. If you know your parties 5 digit extension please press 1 or you may call back during regular business hours."

  • Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    13y
    Originally posted by Tom Goans:
    Am I understanding from all the posts that the majority are looking for ways to NOT provide a written report to the applicant why they were rejected?

    If it is, it would seem simple to just provide a report at all times and remove the question of being within the law...

    I think a majority of us are trying to understand the context of the law. For those of us who pre-screen before using a paid service, and issue denial without the help of a CRA, parts of the law seem to indicate you need to provide a letter and other parts do not.

    In my county, I can look up a person's eviction history in public record at the courthouse at a public access terminal. I can also pay for this service through a company (e.g. National Tenant Network). If I do the former, no FCRA communication required. If I do the latter, I need to provide the applicant with an "adverse action notice" according to the law.

    It's not clear how I am required to provide this notice. My company applications are on-line. Screening is on-line. Is providing notice on-line (or via email) acceptable? Is notice provided in response to applicant solicitation or sent by the landlord unsolicited? The law doesn't define, so I say on-line is fine if the applicant requests it.

    Some counties require a fee to access public records. So is the county that the landlord pays for access now a CRA? After all, the landlord had to pay an agency for access to public record. Sounds like a service, and the law says a CRA has reports "that describes the applicant's rental history based on reports from previous landlords or housing court records..." The county government agency certainly contains the applicant's housing court records. Is a county government agency a CRA? I'd guess that's not the intention of the law... but I suppose that's the purpose of this topic. Discuss and understand.

    BTW, when used, I think all paid service screening providers will provide an adverse action notice letters. Seems like they provide them even for well
    qualified applicants. I guess its a CYA approach. I had a "99" (0..99 is their range) from NTN and they still provided a "Conditional Letter" from their decision point product.

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y
    Originally posted by Chris Martin:
    ...

    What is the basis of the suit? In other words, what is the charge, and is it civil or criminal? ...

    Chris Martin - This comes from page 8 of the previous link I posted, about users of "reports":

    Originally posted by NOTICE TO USERS OF CONSUMER REPORTS: OBLIGATIONS OF USERS UNDER THE FCRA:

    ...
    IX. LIABILITY FOR VIOLATIONS OF THE FCRA
    Failure to comply with the FCRA can result in state government or federal government enforcement actions, as well as private lawsuits. Sections 616, 617, and 621. In addition, any person who knowingly and willfully obtains a consumer report under false pretenses may face criminal prosecution.
    ...
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