On November 15, 2022, the CFPB issued two reports on the tenant background check industry, describing how errors in these background checks contribute to higher costs and barriers to quality rental housing. The CFPB’s analysis of more than 24,000 complaints highlighted the renter challenges associated with the industry’s failures to remove wrong, old, or misleading information and to provide adequate investigations of disputed information.
The tenant background check industry creates reports that include substantial personal information, including credit history, civil and criminal records, and credit scores, as well as the proprietary risk scores on which many landlords and property management companies base their decision to rent to a prospective tenant. The CFPB’s reports - the Tenant Background Checks Market Report and the Consumer Snapshot: Tenant Background Checks - are denied rental housing because negative information is reported that belongs to someone else; outdated information remains on reports; and inaccurate or misleading details about arrests, criminal records, and eviction records are not corrected nor removed from reports. As described in the two reports:
Tenant background check content for landlords has questionable relevance, particularly given the lack of rental payment history;
As corporate landlords have increased their rental holdings, the demand for digital, algorithmic scoring of prospective tenants has increased;
Renters pay for the reports, but often do not see them, and struggle to get errors fixed;
Market dysfunctions result in companies selling erroneous data to landlords; and
Renters often do not receive adverse action notices, a legal right for renters.
According to the CFPB, the the reporting of inaccurate negative information can contribute to difficulty finding affordable, quality housing, and result in people living farther from school or work, paying more in rent and fees, and undermining household financial stability.
Read the CFPB’s release here.
The Tenant Background Checks Market Report can be found here.
The Consumer Snapshot: Tenant Background Checks can be found here.