When a rental application is under consideration, most property managers and landlords require a prospective tenant’s credit report, credit score, and, usually, a background check and eviction screening. Thanks to technology that makes receiving these reports fast and simple, rental screening is easier than at any time in the past.
As a property manager with the opportunity to participate in rental transactions, chances are you’re familiar with the following passage from the Fair Credit Reporting Act:
Any person who knowingly and willfully obtains information on a consumer from a consumer reporting agency under false pretenses shall be fined under title 18, United States Code, imprisoned for not more than 2 years, or both.
The FCRA protects all consumers—including you and me—related to our personal data, such as credit, payment patterns, debt, and court records. This information is collected, stored, and, when inquired about by a creditor, provided by one of several consumer reporting agencies like TransUnion, Equifax, and Experian. Thankfully, the FCRA requires agencies to maintain accurate and complete records. It requires that our private data remain private by imposing specific guidelines for providing it. CRAs may distribute a person’s data if there is “permissible purpose” and the consumer has consented to its release.
For property managers, this is understandably where things become confusing, making the prospect of conducting a rental transaction daunting. Much of the concern stems from questions that swirl around the proper handling of the tenant’s reports. Let’s discuss these important questions and make sense of the issues at hand.
- What defines permissible purpose?
- Who orders reports?
- Who should receive reports?
- Can reports be shared between real estate professionals?
- Can I share reports with the landlord?
Permissible purpose. Let’s say someone applying for a mortgage grants permission to a lender to pull his or her credit report. Mortgage lending is a “permissible purpose” as defined by the FCRA. So is tenant screening. The use of all reports must conform to their intended permissible purpose. A report pulled for a tenant’s rental screening must be used for this purpose alone.
Ordering and receiving reports. Reports can be ordered by the tenant or property manager who has received the appropriate permissions. But who orders the report isn’t really as important as who receives it. To safeguard the consumer, the FCRA mandates that all who receive reports must be credentialed, or vetted in advance. Credentialed recipients are known as “end users”—those who receive the report for its ultimate use in accordance with its permissible purpose.
Credentialing. Companies such as TenantVerify.net, which I own, allow tenants to order reports and authorize delivery directly to a credentialed recipient, such as a listing broker. Credentialing the broker in advance with paperwork and a site visit to their physical location is required before delivery of reports can happen.
Who can’t receive reports. Now that we have established who can take delivery of a report, let’s discuss who should not: an agent representing the tenant. This cannot be stressed enough. All reports must go to the credentialed end user for use in accordance with its intended permissible purpose—rental screening. Since the tenant’s agent does not make the decision on tenancy, they have no legal standing to receive the report. Additionally, if a tenant’s agent were to receive the report, subsequent redistribution to another, such as a listing broker, listing agent, or landlord, is not permissible. Even credentialed brokers with appropriate permission to receive reports aren’t authorized to distribute them to another real estate pro. In an effort to safeguard privacy, the FCRA limits the flow of consumer data directly and only to credentialed entities with permissible purpose.Consumer reporting is one of several tools available to screen tenants. The rules, though there are many, are actually quite logical. Brokers and agents should know the laws that govern the use of consumer reports and have a reputable service provider to rely on for safe and legally compliant rental screening.