Need to Know!

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

July 2, 2014 9:19 pm

HUD Discriminatory Effects Standard & Tenant Screening

The Department of Housing and Urban Development (HUD) is charged with enforcement of Title VIII of the Civil Rights Act of 1968, as amended by the Fair Housing Act (Act) – which prohibits discrimination based on race, color, religion, sex, disability, familial status or national origin.  HUD has long held that the Act prohibits practices that have an unjustified discriminatory effect (commonly referred to as a disparate impact) on protected individuals, whether or not there is an intent to discriminate.  According to HUD, the eleven federal courts of appeal that have ruled on this issue ruled that “…liability under the Act may be established through proof of discriminatory effects. In its final rule, published in February, 2013, HUD formulated a three-part burden shifting test to determine whether a facially neutral business practice results in an unjustified discriminatory effect and represents a violation of Title VIII.  The stated goal is to... View Article

May 27, 2014 7:05 pm

Tenant Screening Reports & Management Company Changes

Tenant Screening Reports & Management Company Changes Residential rental property owners who rely on third party property management companies change companies from time to time.  When they do, questions arise as to the disposition of tenant screening reports procured under the existing management company’s tenant screening agreement. Tenant Screening Agreements generally include language similar to the following: “End User shall use each Consumer Report only for a one-time use and shall hold the report in strict confidence, and not disclose it to any third parties.” A strict reading of this provision would prohibit passing of tenant screening reports from one management company to another.  The Consumer Financial Protection Bureau’s Notice to Users of Consumer Reports (published as required by the Fair Credit Reporting Act (FCRA)) contains two provisions that apply: Users Must Provide Certifications Section 604(f) [of the FCRA] prohibits any person from obtaining a consumer report from a consumer... View Article

May 27, 2014 5:35 pm

Marijuana – Tenant Screening & the Lease

Changing laws and attitudes regarding possession and use of marijuana raise a number of questions for rental property owners and managers – the answers to which may impact tenant screening practices and the lease itself.  What we Know Washington State and Colorado now allow recreational use and possession of up to one ounce of marijuana by adults over the age of 21; 21 states (including Washington and Colorado) allow use of “medical marijuana”; and Possession and use of marijuana remain a crime under federal law. Complicating matters further: Use of medical marijuana may be associated with a disability, raising the question of “reasonable accommodations” under the Americans with Disabilities Act (ADA); and Marijuana can be ingested as well as smoked. What to Do? The easiest way to wrap your head around (and decide) this issue is to start with the options – which are pretty straight forward: Prohibit possession and... View Article

April 18, 2014 11:04 pm

FCRA Accuracy Requirement – Recent FTC Enforcement Activity

Section 607(b) of the Fair Credit Reporting Act [15 U.S.C. § 1681e] (FCRA) reads as follows: (b) Accuracy of report.—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. It is hard to argue with the spirit of this provision.  Tenant and employee screening reports impact individuals when they are most vulnerable – in their search for housing or employment.  That said, landlords and employers have the right (and duty) to thoroughly vet prospective tenants and employees – to protect themselves, residents, employees and clients. We rely on our screening company to provide the information needed to adequately screen prospective tenants and employees.  If that data is flawed – if it is either incomplete or inaccurate – someone gets hurt.  Landlords and employers are negatively impacted either way – whether... View Article