Need to Know!

Investigative Consumer Reports, To Be or Not To Be

September 21, 2015 3:43 pm

The federal Fair Credit Reporting Act (FCRA) and its progeny in state law focus heavily but not exclusively on consumer credit reporting.

After all, the Congress, in its findings in Section 602 the FCRA [15 U.S.C.§ 1681] begins with the statement that:

“The banking system is dependent upon fair and accurate credit reporting. Inaccurate credit reports directly impair the efficiency of the banking system, and unfair credit reporting methods undermine the public confidence which is essential to the continued functioning of the banking system.”

But Congress goes on to say:

“An elaborate mechanism has been developed for investigating and evaluating the credit worthiness, credit standing, credit capacity, character, and general reputation of consumers… <and that> there is a need to insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy.”

Consumer Reports are subsequently defined as “…any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used… in whole or in part… as a factor in establishing the consumer’s eligibility for….” more than just the extension of credit.

One more definition and we will move on.  The term “Investigative Consumer Report” is defined as a consumer report or portion thereof in which information on a consumer’s character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer… who may have knowledge concerning any such items of information.”

California

California distinguishes between the definition and regulation of Consumer Credit Reports and Investigative Consumer Reports – by crafting two separate statutes.  The first is the CCRA (the Consumer Credit Reporting Act).  It focuses on credit reporting.  The second is the ICRAA – the Investigative Consumer Reporting Agencies Act – which focuses on everything else.

But here’s the kicker.  The ICRAA defines an “Investigative Consumer Report” (ICR) as a consumer report containing information on a consumer’s character, general reputation, personal characteristics, or mode of living obtained through any means.

The Question?

Are tenant screening reports Consumer Credit Reports, Investigative Consumer Reports or both – and are tenant screening companies Investigative Consumer Reporting Agencies as defined by the ICRAA?

The Answer

Under federal law, it depends on what information is contained in the report and whether that information was obtained through personal interviews.  Public records data (judgments, for example) appearing on the credit report might be viewed as speaking to character, general reputation, and mode of living of the consumer.  But that information is not obtained via personal interview and therefore does not constitute an ICR.  Nope.

But how about reports containing rental verifications – conducted by the tenant screening company – by telephone, written questionnaire or email?  Might those constitute Investigative Consumer Reports.  Not an unreasonable conclusion!  Yep.

The language… “…obtained through any means….” found in the ICRAA represents a significant expansion of the definition of an Investigative Consumer Report.  One might conclude, for example, that certain civil judgments showing on the consumer credit profile (evictions, for example) speak to character, general reputation, etc.  I think so.

It would would be a tortured argument, indeed, that reports containing rental verifications conducted by tenant screening companies do not constitute Investigative Consumer Reports under the FCRA and ICRAA. Note, too, that the ICRAA specifically addresses use of investigative consumer reports “…in connection with the hiring of a dwelling unit [1786.12(d)(5)]….”

But…

What about Ortiz v. Lyon Management Group, Inc. (2007) 157 Cal.App.4th 604.  An appeals court in Ortiz concluded that the ICRAA was unconstitutionally vague – at least with regard to reporting of eviction records – since such records might go to both credit worthiness and character, etc.

Now comes Connor v. First Student, in which another California appeals court rejects Ortiz – concluding that there is actually no conflict between the two statues – that both (the CCRA & the ICRAA) can apply simultaneously.

Rumor has it that the issue will end up in the California Supreme Court.  But until then… 

What to Do

Let’s start with the implications of treating tenant screening reports as Investigative Consumer Reports – in California and elsewhere.  What would be required of us – beyond what we already do?

First of all, End-users must within three days of requesting the Investigative Consumer Report (ICR) notify the consumer in writing that an ICR will be made regarding the consumer’s character, general reputation, personal characteristics, and mode of living.  So, we add that language to the application, disclosure & authorization – which is completed and acknowledged (signed) before the report is pulled… a current best practice!

The person procuring the report (the End-user) must agree to provide a copy of the report to the subject of the investigation if requested, and “…provide a means by which the consumer may indicate on a written form, by means of a box to check…” that they wish to receive a copy of the report. Add a box to the application.  Exhausting!

Provide the applicant a copy of their report if requested.  Extra step, I agree.  But why not?  Why shouldn’t the applicant see what is in their report.  They paid for it. If it is wrong, they have a right to dispute it.

Note that information obtained by interview (rental verifications) is only reportable (by your tenant screening company) to the extent that reasonable procedures were followed to confirm its accuracy – and that other reporting restrictions (the 7-year rule, for example) were followed.  This is required in both consumer credit and investigative consumer reporting.

Ask your tenant screening company to conduct rental and employment verifications on your behalf – and if they would be willing to fulfill report requests – which together would more than offset the hassle associated with doing so.  Just sayin’.

For more information on this and related topics visit Moco Incorporated or MyScreeningReport.com®.

Categorised in: ,

Comments are closed here.