Landlords: Are YOU breaking the law?

General Landlording & Rental Properties
13yFollow

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?

Podcast Guest on Show #92
1Reply
77 views

Most Popular Reply

Aaron Mazzrillo
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....

3Reply
See this reply in the discussion

41 Replies

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

    ...

    From page 5 of the link I posted earlier giving the FCRA:

    Originally posted by FCRA:

    ...
    (f) The term “consumer reporting agency” means any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.
    ...

    The part there that makes me wonder whether these local government reports from websites fit this is this statement: "for the purpose of furnishing consumer reports to third parties". I wouldn't say that those gov't agencies are supplying the data for the stated reason; they are supplying it because it is public record, and the fees pay for the costs that are associated with delivery of the public information via those websites. Of course, this is open to debate, and I could be wrong :)

    But you are correct in implying that there exists lots of gray areas in this set of regulations, and even when you are attempting to fully comply you could still be on the wrong end of a lawsuit.

    1Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    13y
    Originally posted by Steve Babiak:
    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.
    ...

    I see, but what charge? Is this a criminal offense? A Felony?

    0Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    13y
    Originally posted by Steve Babiak:
    Originally posted by Chris Martin:
    ...
    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.

    ...

    From page 5 of the link I posted earlier giving the FCRA:

    Originally posted by FCRA:

    ...
    (f) The term “consumer reporting agency” means any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.
    ...

    The part there that makes me wonder whether these local government reports from websites fit this is this statement: "for the purpose of furnishing consumer reports to third parties". I wouldn't say that those gov't agencies are supplying the data for the stated reason; they are supplying it because it is public record, and the fees pay for the costs that are associated with delivery of the public information via those websites. Of course, this is open to debate, and I could be wrong :)

    But you are correct in implying that there exists lots of gray areas in this set of regulations, and even when you are attempting to fully comply you could still be on the wrong end of a lawsuit.

    For sure, there is room for interpretation and there is grey area. I just don't see someone suing in federal court for $0 (applicant didn't pay a fee) or $35 (applicant paid a fee) or suing for performance (landlord must rent to me for breach of FCRA violation).

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y
    Originally posted by Chris Martin:
    Originally posted by Steve Babiak:
    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.
    ...

    I see, but what charge? Is this a criminal offense? A Felony?

    go to page 61 of the FCRA link I posted previously, that's where section 616 starts.

    1Reply
  • Mike Franco
    Los Angeles, CA · Member since 2013 · 555 posts · 261 votes
    13y

    a real estate or tenant/landlord attorney could answer this question, and for free.

    0Reply
  • Kimberly H.
    Residential Real Estate Broker · Chicago Suburbs, IL · Member since 2013 · 1k+ posts · 594 votes
    13y

    @Bill Gulley

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

    I thought I was supposed to give it to them if they asked for it.

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    13y

    You may be in violation of the credit agency reporting agreement, as they may allow you can show them what's reported, discuss it with them, assist them in getting corrections made if necessary, but not give them a copy or the original you print as the agency wants them to obtain a copy from them at their price. You report prints out to your account and you probably get a cut in price as a creditor. That was the thinking, it's about their fee income. Could be construed as obtaining their report under false pretense (cheating them of the reporting fee) having a lender/other pull for them without the intention of applying for credit under the FCRA. You'd think the difference of say $15 difference wouldn't be anything, but it's probably a hundred thousand reports generated daily.

    I know now that an appraisal paid for by a borrower, a copy must be given to them upon request. Recently, there may have been a change to the credit report situation, not sure today, but back when it was not allowed, better call the credit folks and see what the current policy is. :)

    0Reply
  • Jeff S.
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    13y

    My understanding is you CANNOT discuss their credit report with them. That is why you are directing them to the credit agency for them to find out for themselves.

    0Reply
  • David Beard
    Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
    13y

    The rejected applicant has a right to a free copy of their credit report from the agency, if they request it directly from the agency within 60 days. Of course, anyone can get a free report from each of the three primary bureaus each year, but the rejection entitles the applicant to an additional freebie.

    1Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    13y

    David is correct, from the agency providing the report, not the creditor who obtained the report (you). They need to be told they can get it, informed in writing, but you don't provide it.

    Jeff, No, a creditor can and needs to discuss credit issue, amounts owed, why payments were late, circumstances, etc. From that the applicant can provide letters of explanation for consideration.

    It's a different game if they are rejected or you have an adverse situation, the where, why and reasons need to come out.

    Now, if, as a LL, you sign up with a reporting agency to pull reports or a provider, they may well have other restrictions as they may not want a LL giving credit advice or drilling down in personal finance issues, so your agreements with them should prevail. Saying that different creditor accounts may have different agreements, at a lending institution they can drill down on issues and discuss issues with an applicant.

    But, Jeff, it's probably better not to go there, why take on the liability of giving such advice for a rental? LL's are at risk for damages, late rents to justify the extension of credit. If the rent isn't paid on time, due to legal requirements of notice and time to pay, that is an extension of credit that could occur. Shoving cash across a table for a loan is a different matter. :) .

    0Reply
  • Kimberly H.
    Residential Real Estate Broker · Chicago Suburbs, IL · Member since 2013 · 1k+ posts · 594 votes
    13y

    When I read though the FCRA rules I didn't see where it was prohibited. They say I need to give the credit reporting agency contact info...all of which is on the report....although I do now see in my agreement with the last credit reporting agency that I agreed not to forward the report. Oops. So I guess it depends on your agreement with the reporting agency. I guess they don't want irate applicants calling them to complain.

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    13y

    Yes Kimberly, all three want their money, like I said $15 x about 100,000 daily is a nice chunk of change that customers need to pay. If they are turned down, rejected, it's free as to that matter. Right to contest information, etc. Don't had out your reports, file them, I suggest you keep them for over three years, ask your attorney. Also, they are confidential, secure them and destroy when not needed to be retained (I had a burning party every month to keep files cleaned out!) :)

    0Reply
  • Uwe K.
    Milwaukee, WI · Member since 2009 · 203 posts · 50 votes
    13y
    Originally posted by Kimberly H.:
    @Bill Gulley

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

    I thought I was supposed to give it to them if they asked for it.

    In Wisconsin state law requires you to give the applicant a copy of the credit report IF they paid for it through a "credit check fee" (you're not allowed to charge an "application" fee).

    0Reply
  • Uwe K.
    Milwaukee, WI · Member since 2009 · 203 posts · 50 votes
    13y

    From the link: "When an adverse action is taken that is based solely or partly on information in a consumer report, the FCRA requires you to provide a notice of the adverse action to the consumer."

    I don't see where it would require the AA notice if the credit report was not used at all. If you don't use it, you cannot base your decision on it, hence the FCRA does not apply.

    It i also irrelevant if the applicant paid for it or not. Credit card companies, for example, are bound by the FCRA and typically do not charge app fees, but still have to send you the notice if you're not worthy.

    0Reply
  • John Rooster
    Denver, CO · Member since 2013 · 409 posts · 105 votes
    13y

    I agree with Kirby. Based upon the text in the original link, If the reason for the rejection is not wholy or partly due to information in the Consumer report, you are not obligated to provide them a written rejection, even if you do access their consumer report.

    Beyond that, I think consumer reports are garbage and subject to manipulation (both pro and con), so I do not use them, I just do a Statewide court search for $7 (in addition to verifying employment), thus I avoid having to concern myself with the crazy requirements of credit reporting laws.

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    13y
    Originally posted by Uwe K.:
    Originally posted by Kimberly H.:
    @Bill Gulley
    you said, "Remember too, that if you get a credit report you can't give them a copy of it."

    I thought I was supposed to give it to them if they asked for it.

    In Wisconsin state law requires you to give the applicant a copy of the credit report IF they paid for it through a "credit check fee" (you're not allowed to charge an "application" fee).

    Yes, Uwe, I've been speaking to agreements with your credit reporting agencies, certainly state law will trump such agreements.

    Good point about fees, I suggest you not charge any premium over the actual cost of obtaining any credit report. If you are allowed to charge any application fee, charge it separate from other expenses like reports or verification expenses, charging for such can put you in the shoes of conducting that business and some matters have compliance issues. :)

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free