In a perfect world, anytime a tenant moved out, a new and equally perfect tenant would be waiting to move in. A brief chat would suffice as assurance that the new tenant would be ideal for the community, a handshake and keys would be exchanged.
Unfortunately, we do not live in a perfect world. In the real world, poor decisions are made and mistakes happen. Perhaps the applicant’s actions in the past affected his or her credit, criminal or even employment history. Perhaps the landlord or property manager has mistakenly “shaken hands” with the wrong tenant, resulting in a stressful and costly experience for everyone involved.
A prospective tenant completes an application specifically granting permission to pull a credit report and background history, which is then screened to generate a consumer report. The resulting consumer report is then compared to your written rental criteria, allowing for a consistent decision to be properly implemented. If the applicant proves to be the perfect candidate, the move-in process begins.
However, not everyone is perfect. Sometimes, the applicant falls short of your criteria such as with a low risk score, a low income to rent ratio, or too many collection accounts. So you decide to offer the rental under modified terms with an increased security deposit, pre-paid rent requirements or a co-signer. Other times, an eviction hit or violent criminal conviction results in a denial.
In either cases, denied or conditional (modified terms) decision, you are to provide the applicant in writing (1) an Adverse Action Notice explaining why the decision was made, (2) a Summary of Rights Under the Fair Credit Reporting Act and (3) any additional forms required in your state.
There are the instances when the conditional or denied applicants disagree with the decision and would like to dispute the completeness or accuracy of the consumer report. At a minimum, the Adverse Action Notice must include:
- The name, address, telephone and website of the agency that provided the report.
- A statement that the agency did not make the decision to take the adverse action and cannot give the specific reason for it.
- A notice of the applicant’s right to dispute the accuracy of the information provided by the agency and the applicant’s right to receive a free report from the agency upon request within 60 days.
Your reporting agency should be able to provide a compliant Adverse Action template to use. For your protection, store a copy denoting the date the notice was delivered to the applicant.
When the consumer disagrees with the decision based on information provided by the agency, he or she may initiate a consumer dispute to correct any inaccuracies thus in turn improving the tenant screening reports that landlords rely on.
For more information on the FCRA and Adverse Action Notices, visit the Federal Trade Commission website.
By Caryn Bennett