CFPB highlights accuracy issues in two studies on tenant background screening studies

The CFPB not too long ago launched two studies regarding tenant background checks.  One report, “Consumer Snapshot: Tenant Background Checks,” discusses shopper complaints acquired by the CFPB that relate to tenant screening by landlords.  The opposite report, “Tenant Background Checks Market,” appears to be like on the practices of the tenant screening business.

Shopper Snapshot.  The report describes the tenant screening course of confronted by rental candidates. It highlights the next frequent points reported in complaints:

  • Unfavorable data that doesn’t belong to the patron, which the report attributes to the usage of “name-only” matching and “wildcard” (i.e. partial identify) searches by tenant screening firms;
  • Inaccurate or deceptive details about evictions and rental debt, with the CFPB noting that based mostly on candidates’ experiences, the presence of eviction data, no matter accuracy and consequence, has a excessive probability of resulting in denials of rental housing; and
  • Errors in felony document data, with the CFPB noting that inaccuracies in felony data might have an outsized affect on Native American, Black, and Hispanic communities due to their disproportionate illustration within the felony justice system and regardless of identified points with inconsistent public data programs throughout jurisdictions, many tenant screening firms conduct minimal guide verification of data and proceed to report inaccurate and incomplete civil and felony public data.

The CFPB states that “[t]he points described in CFPB complaints and qualitative analysis recommend that some tenant screening firms are usually not assembly the authorized requirement beneath the FCRA ‘to comply with affordable procedures to guarantee most potential accuracy’ of the knowledge within the studies they compile.”  In discussing the challenges confronted by candidates in addressing errors, the CFPB highlights the usage of proprietary scoring fashions or algorithms by tenant screening firms to categorise a renter as roughly dangerous.  The CFPB studies that complaints and interviews confirmed an absence of constant compliance with FCRA hostile motion discover necessities by landlords who took hostile motion based mostly on tenant screening studies and with FCRA dispute necessities by tenant screening firms.  It concludes the report with the assertion that “[t]he experiences documented on this report illustrate that tenant screening studies are an rising space of concern for a lot of throughout the nation.”

Market Report. The CFPB’s business analysis used for the report targeted on publicly out there data from a pattern of 17 tenant screening firms that provide companies to landlords throughout the nation.  These firms have been chosen based mostly on their perceived prevalence in sources akin to: public-facing web sites, analyses by business observers, tutorial analysis, shopper complaints submitted to the CFPB, and up to date lawsuits.  The CFPB estimates {that a} majority of landlords use tenant screening studies when contemplating rental candidates.

The report incorporates an outline of the rental housing panorama, an outline of the tenant screening business, an outline of the options of tenant screening studies, and a dialogue of the federal, state, and native legal guidelines that apply to the creation and use of tenant screening studies.  It additionally incorporates a bit entitled “Market Challenges” during which the CFPB discusses the next points that “have the potential to create or reinforce market distortions and harms for landlords and renters”:

  • Many tenant screening firms seem to over-include felony and eviction courtroom data because of automated matching procedures, together with “wildcard” matching, that result in inaccurate matches.  With respect to eviction data, some tenant screening firms and their knowledge distributors seem to lack enough procedures to account for the complexities of and errors inherent in such data.  With respect to felony data, the CFPB discovered many situations the place tenant screening studies appeared to incorporate out of date non-conviction felony data or incomplete arrest document data and likewise discovered that tenant screening firms and their knowledge brokers may fail to have procedures to take away felony data that have been expunged or sealed.  As to each eviction and felony data, the CFPB raises questions in regards to the worth of such data in predicting tenant conduct and discusses rising traits by state and native jurisdictions to restrict entry to eviction data and prohibit the usage of felony historical past data inn rental selections.
  • The CFPB additionally questions the relevance of credit score report data and credit score scores, which are sometimes included in tenant screenings studies, as a predictor of an applicant’s probability to pay hire and be a accountable tenant.  The CFPB cites analysis suggesting that renters could also be extra prone to prioritize rental funds over the fee of different money owed.  In keeping with the CFPB, this calls into query the power of the connection between an applicant’s credit score profile and the probability the applicant can pay hire.  The CFPB studies that some native governments restrict the usage of sure credit score reporting data, together with credit score scores, in rental selections.
  • The CFPB studies that along with credit score scores, many tenant screening firms provide a personalized rental danger rating or a choice suggestion akin to “settle for,” “reject,” or “settle for with circumstances.”  Some tenant screening firms enable landlords to specify the factors most vital to them (e.g. revenue, employment, felony historical past) and the report generates a suggestion on that foundation.  Different firms create total danger scores based mostly on their very own proprietary fashions.  The CFPB, contrasting such fashions with “documented mannequin danger administration within the monetary companies house,” signifies that it’s unaware of goal validation of  such fashions or detailed descriptions of the precise variables or weights utilized in a given mannequin.  The CFPB additionally observes that algorithmic screening and automatic scoring can obfuscate the underlying causes for hostile selections on rental purposes and create dangers for landlords, akin to not having the ability to present sufficient data to permit candidates to problem the outcomes or right inaccurate data and allegations of Honest Housing Act violations and different threats of civil litigation. 

The CFPB concludes the report with an inventory of future actions it plans to take relating to the tenant screening market.  Along with extra monitoring and analysis, the CFPB plans to:

  • Establish steering or guidelines it might concern to make sure authorized compliance by the “background screening” business;
  • Decide easy methods to require the “background screening” business to develop and keep acceptable and correct shopper reporting practices in accordance with relevant legislation;
  • Coordinate enforcement with the FTC to carry tenant screening firms accountable for having affordable procedures to guarantee correct data of their studies; and
  • Coordinate with federal and native authorities businesses to make sure tenants obtain well timed details about potential inaccuracies and enough hostile motion notices.