Need to Know!

Categories for Direct-to-Consumer Screening

December 12, 2014 10:25 pm

FCRA Accuracy Requirement & Instant Tenant & Employee Screening Reports

Tenant screening reports typically include a consumer credit report from one of the three major credit bureaus, a civil (eviction) records search and a criminal records search. More comprehensive tenant screening reports may include employment verifications, rental references and  a recommendation based on the landlord’s rental criteria. Tenant screening companies are specialized “Consumer Reporting Agencies” (CRA’s) – as defined (and regulated) by the Fair Credit Reporting Act [15 U.S.C. § 1681e] – commonly referred to as the FCRA. Section 607(b) of the FCRA requires that… “Whenever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” The Consumer Financial Protection Bureau is tasked with enforcement of the FCRA. Much of the focus is on accuracy, of course, since the CFPB recognizes (as Congress did when crafting the FCRA) that the banking system and,... View Article

November 24, 2014 7:33 pm

Use of Eviction Filings for Tenant Screening – A Growing Dilemma

Eviction records search results are an important part of the tenant screening process – since they are “generally” triggered by the tenant’s failure to fulfill the terms of their rental agreement. Failure to pay rent (or pay rent on time) is perhaps the most common reason for an eviction filing.  But violating other provision of the lease may result in an eviction as well. The majority of evictions are settled (dismissed) by the plaintiff (landlord), however, when the defendant (resident) pays or moves out – since the cost (in time and treasure) associated with pursuing the case to judgment is high and the odds of recovery is low.  But here is the rub.  The court record tells us that a filing was dismissed – but not why it was dismissed.   It is possible, therefore, that the case was thrown out by the judge  due to lack of merit or a... View Article

November 21, 2014 10:28 pm

Avoid Unintentional (Disparate Impact) Discrimination – It is Good Business!!!

Introduction There is often a visceral reaction by landlords and employers to legislation or regulatory activity that would limit use of credit and public records data for tenant and employee screening purposes – even when there is little evidence that doing so is effective.   Limits these days are often associated with the disparate impact legal theory. Under this theory, a business practice that has a disproportionate (and negative) impact on protected individuals can form the basis of a (housing or employment) discrimination claim.  The defense against such claims is “business necessity”, but only when there is no practical alternative – no way to accomplish the same thing without (as HUD calls it) a discriminatory effect. Analysis Assume for the sake of argument, that the courts or regulators are right in entertaining certain claims based on the disparate impact theory – that there is no correlation between use of certain information and... View Article

October 28, 2014 4:19 pm

Tenant Screening & Limits on Use of the Death Master File (DMF)

The Bipartisan Budget Act (Act) of 2013 imposed strict limits on access to (and use of) data from the “Death Master File” (DMF).  The DMF is “…information on the name, social security account number, date of birth, and date of death of deceased individuals maintained by the Commissioner of Social Security….”. DMF data is accessed and reported by the national credit bureaus, and is used extensively as a fraud prevention tool. The limit on access to the DMF was added to the Act at the urging of the administration to combat a growing form of tax fraud – use of the personal information of deceased individuals to generate phony tax returns and refund requests.  Section 203 of the Act prohibits the Commerce Department from granting access to the DMF within three calendar years of an individual’s death unless the recipient is first “certified” under Section 203 (b) of the Act. ... View Article

September 23, 2014 11:48 pm

The Future of Tenant Screening –® Update

On October 1, 2009, Moco Incorporated introduced the industry’s first comprehensive direct-to-consumer tenant screening product under the® (MSR) brand. On October 13, 2014 – almost exactly five years after the initial launch – Moco will introduce the second generation of this innovative product – incorporating Experian’s ConnectSM technology, making MSR a hybrid direct-to-consumer and traditional tenant screening product.  The tenant screening transaction can now be initiated by either the landlord or consumer. End-users (landlords) are now electronically credentialed – to confirm that they are who they say they are and that they have permissible purpose to access consumer reports (including tenant screening reports) in full compliance with Section 607 of the Fair Credit Reporting Act.  The process offers the dual benefit of protecting applicants against unauthorized access to their information and leaving no question as to the authenticity of the report.® (MSR) is a fully transparent, legally compliant... View Article

September 16, 2014 11:11 pm

Portable Tenant Screening Reports – Growing Appeal

Year after year and in state after state, low-income housing advocates push legislation that would require landlords to accept so-called “portable” tenant screening reports (often referred to as a “portability mandate”).  The argument (which has a number of holes) goes something like this: 1. Low-income and other hard to place individuals are often faced with paying multiple tenant screening (or application) fees before finding a landlord who will accept them – only to find they no longer have the funds to cover the security deposit. 2. Tenant screening reports are all the same – contain the same elements (credit, criminal records, etc.) and are equal in quality. What exactly is a portable tenant screening report and how might it reduce the burden on low income and other hard to place individuals?  Simply stated, portable tenant screening reports are reports that can be “shared” with multiple landlords – in a way that assures... View Article

August 14, 2014 5:20 pm

Tenant Screening – Efforts to Limit Public Access to Eviction Records!!

There was, is and will always be… a struggle between those who believe strongly in the importance of unfettered access to the public record and those who would limit access in pursuit of specific (often laudable) goals.  A recent Washington Supreme Court opinion (filed on July 24, 2014) – Hundtofte v Encarnacion – is a case in point. The facts of the case are pretty straight forward.  One month into the lease, the apartments were sold and the new owner wanted Encarnacion to switch to a month-to-month lease.  Encarnacion refused.  Hundtofte (the landlord) filed an unlawful detainer action against Encarnacion – even though there was a valid lease and Encarnacion had done nothing to warrant an eviction. The case settled and the family moved out in return for three months rent and the promise of a favorable reference.  But when they applied for a new apartment, the tenant screening company... View Article

August 5, 2014 5:17 pm

Tenant Screening 101 – Applicant Identification

Confirming the identity of (or authenticating) prospective residents is perhaps the most important step in the tenant screening process, since nothing else you do matters unless the applicant is who they say they are.  The content of the tenant screening report – the credit profile, public records (criminal and eviction) search results and rental and employment verifications – depends on it. Authenticating prospective residents is so important that it warrants redundancy.  That said, steps taken will vary based on the tenant screening model and process employed. Traditional Tenant Screening Model – Paper Application Under this model, the process starts with the rental application and looks like this: Applicant completes application. Landlord reviews application – ensuring that it is complete (no unexplained blanks). Landlord compares personal information supplied by the applicant to the applicable government issued picture identification. Landlord submits application to tenant screening company. Tenant screening company compares credit header... View Article

July 17, 2014 4:48 pm

Tenant Screening – Credit Scores, Dodd-Frank & Risk Assessment Models

Tenant screening companies have long struggled with steps required by the three major credit bureaus and other consumer data providers to confirm the identity and permissible purpose landlords.  The site inspection requirement is particularly troublesome for private landlords – those with a small number of rental properties.  It is both expensive (arguably impractical) and intrusive – since the majority operate out of their homes. Some (tenant screening companies) attempt to circumvent the site inspection requirement by offering private landlords summary only, or score-based risk assessments (or recommendations) – by removing the credit detail and score from the tenant screening report.  But there is a problem.  Background The Fair Credit Reporting Act requires that landlords provide oral, written, or electronic Notice of Adverse Action to prospective residents when such action is based in whole or in part on the content of a tenant screening report.  The notice must inform the applicant... View Article

July 8, 2014 5:58 pm

Tenant Screening – Income Criteria

The majority of landlords include an income multiple component in their rental criteria.  Most look for gross income equal to 2.5-3.0 times the rental amount for a straight-up approval. Prospective residents who fall short of the gross income threshold may be approved conditionally or denied.  Landlords may set conditional approval ranges, within which the applicant is approved with an increased deposit or cosigner.  For example, if 3.0 times the rental amount is required for a straight up approval: 2.5 to 2.99 times the rental amount may be approved with an increased deposit; 2.0-2.49 times the rental amount may be approved with a cosigner; and <2.0 times the rental amount may result in a denial. Income Sources Landlords are called upon to consider income from many sources.  Some limit consideration to garnishable income.  Garnishable income is income employers can be ordered (by the courts) to pay directly to a creditor or... View Article