Tenant Screening Adverse Action

Tenant Screening Adverse Action

What you need to do when denying a tenant.

You received your tenant screening reports and today is the day you have to make a decision. You've done your due dilligence by ordering a comprehensive tenant background check indcluding criminal records and credit reports as well as landlord and employment verifications. Unfortunately, upon inspecting the reports, you find that this applicant is not the type of tenant that you are looking for.

Landlords and tenants both dread the denial process. For landlords it means restarting the search for the right tenant, but it also means fulfilling legal obligations towards the rejected applicant by notifying them of their rights to see the reports and to correct any inaccurate information. The Fair Credit Reporting Act call these legal obligations Adverse Action Notices.

Adverse Action Notices are communications from landlords to current or prospective tenants of "adverse action" that the landlord is going to take due to an issue that was found on the tenant applicant's tenant screening report.

What qualifies as adverse action?

Any action by a landlord that is unfavorable to the interest of the current or potential tenant based on information found in their tenant screening report is considered adverse action. While outright denying the unfavorable tenant applicant is a kind of adverse action, it is not the only options a landlord has and can give notice for. Below are some other commonly used adverse actions:

• Denying a tenant application
• Requiring a co-signer on te lease
• Requiring a larger deposit

These are all considered "adverse" because they are disadvantageous to the tenant applicant.

What are a landlord's responsibilities when taking adverse action?

Landlords that are taking adverse action based partly or completely on information provided in the applicant's tenant screening report, are required to notify the applicant, even if the tenant screening report (consumer report, including credit report, criminal records, verifications, etc) is not the main factor for the landlord's decision. Oral adverse action notices are allowed, however, the FCT (Federal Trade Commission) recommends providing written or electronic notice providing the landlord with recorded FCRA compliance.

From the FTC:

"The notice must include:"

• the name, address, and phone number of the consumer reporting company that supplied the report;
• a statement that the company that supplied the report did not make the decision to take the unfavorable action and can't give specific reasons for it; and
• a notice of the person's right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get a free report from the company if the person asks for it within 60 days.”

AAA Credit Screenig Services makes adverse action notifications simple for lanlords by providing form letters using our online reporting platform (InstaScreen). After logging into your account, navigate to the "results" page on your tenant applicant's report and then go to "Disclosures and Forms and select "Adverse Action Tenant Denial" from the drop-down list. Click "View" and InstaScreen will auto-populate a Tenant Adverse Action Letter with your and your tenant applicant's information, including a disclosure of rights under the FCRA and contact information to AAA Credit Screening Services if they have questions. You can then edit the letter to fit your particular situation and to comply with individual state laws.

DISCLAIMER: This is an informational article and NOT legal advise. If you have questions about a specific problem or issue, please contact your attorney.

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