Need to Know!

FCRA Accuracy Requirement & Instant Tenant & Employee Screening Reports

December 12, 2014 10:25 pm

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, arguably, the economy “…is dependent upon fair and accurate credit reporting”.

The three major credit bureaus have taken considerable fire from regulators (the Federal Trade Commission and the CFPB) as well as the media (60 Minutes – for example) – regarding the accuracy of consumer credit reports and the handling of disputes.  Here is an excerpt from a previous post on the subject:

“The anecdotes are compelling. Our hearts go out to those whose credit is negatively impacted as a results of identity theft or a mistake on the part of the creditor (or Furnisher as defined by the Fair Credit Reporting Act).  But what is the true scope of the problem – what is the error rate and extent to which these errors negatively impact the cost and availability of consumer credit?

The FTC issued its fifth interim Report to Congress regarding credit report accuracy in December 2012 as required by the FACT Act.  The study sampling was 1,001 consumers and 2,968 reports (roughly three per consumer).  The study found that 6.6% of reports examined contained errors that when corrected resulted in a score increase – but only 2% of those had a score increase of 25 points or more.  Only 2.2% of reports examined had credit score increases sufficient to move them to a lower credit risk classification – reduce their borrowing costs.”

So it might be argued that 98% of credit scores reflect the appropriate risk classification – which is not good enough, of course, if you are one of the 2%.  We can and should try to do better, but the data does put the problem (and the likelihood of further improvements) in perspective.

A much bigger issue in our view – one that has recently gotten the attention of the CFPB – is the accuracy of non-credit (notably public records) data. The CFPB recently settled claims with two CRA’s – for returning erroneous criminal findings (false positives) which negatively impacted job seekers. The employers were targeted as well – for failing to follow the pre and post adverse action notification requirement – which, had they been followed,
may have mitigated the damage.

The problem is the lack of reliable personal identifiers in the public record – forcing us to search on name alone in the case of civil (or eviction) records – name and data-of-birth in the case of criminal records.  The problem is most acute, obviously, when dealing with common names.  False positives have been (and continue to be) a significant problem as a result.

While much has been written regarding the impact of inaccuracy on consumers, very little has been written regarding the impact of false positives on landlords and employers.  Yet erroneous public records hits can be quite damaging – causing them to deny residency or employment to otherwise well qualified applicants.   Equally important, of course, is the potential for under-reporting – which can have a decidedly negative impact on the business or a property.

Under-reporting is a bi-product of over-reliance on instant (database) public records searches.  Don’t get me wrong.  Database products are quite useful – in the hands of a skilled investigator – who has the time, tools and skills necessary to avoid underreporting and false positives.  It is a sole reliance upon database solutions that is problematic – due to a lack of consistency and availability of court records and the aforementioned lack of personal identifiers.  Exclusive reliance on database products – without the attention of a skilled investigator – inevitably results in under (or over) reporting.  Over reporting suggests the CRA is either clueless or willful in their non-compliance. Under-reporting suggests an acute awareness of the risk by the CRA – who then over-filters the data – resulting in missed records.

Bottom Line
All it takes is a few minutes and a pair of eyeballs to deliver an accurate public records search – someone with the knowledge and tools necessary to do additional searches (based on alias’ and address history – disclosed and undisclosed).  We know from our own experience that these additional searches account for fully one third of valid hits in our tenant and employee screening reports.

Tenant and employee screening companies are required by the FCRA “…to follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.”  Those who do not are now paying the price as a result of legal or regulatory action or evolving reseller policy – a price previously borne by consumers and increasingly paid by landlords and employers.

Talk with your tenant and employment screening company. Ask what exactly is included in the report – ask about the source and methodology associated with their public records work.  Ask if they put a pair of eyeballs on their reports and whether those eyeballs conduct additional searches based on alias and address history – some of which is undisclosed. Ask what tools they use and what steps they take to confirm a match – avoid false positives.  Ask about turn-around time, but beware of those promising instant public records searches.  Quality public records results can, however, be returned quickly – often within an hour or so – quick enough, certainly, given the quality difference.

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