I've always thought (and still think) that requests for consumer credit reports for residential rentals is an abuse of the Fair Credit Reporting Act (FCRA).
Why do I hold an opinion that seems to be contrary to common practice?
First, I'm no stranger to holding opinions that contradict popular positions. So, this one shouldn't really surprise anyone who actually knows me. But, unlike many, I don't hold opinions based on "feelings." I form opinions based upon facts as I understand them.
And, my opinion that requesting consumer credit reports for residential rentals is, 1) a violation of the FCRA, and 2) unnecessary. Here are the facts in support of my opinion.
A Violation of the Fair Credit Reporting Act?
What I believe is most important of my reasons, is that requesting credit reports for residential rentals is a violation of the Fair Credit Reporting Act because no credit is being extended.
Yes. I understand there are those who argue that a lease is a contract, and for THAT reason alone, a landlord is entitled to obtain a consumer credit report from a tenant applicant.
However, if you actually READ the Fair Credit Reporting Act, you'll find that the entire law is intended to restrict the use of a consumer credit report to its use for commercial business purposes.
Additionally, if you read § 604. Permissible purposes of consumer reports [15 U.S.C. § 1681b], you'll find absolutely no mention of using a consumer credit report for residential lease or rental purposes. The issue of residential leasing isn't even eluded to in theAct.
But, what I see as the most overwhelming evidence that the use of consumer credit reports for residential rentals is a violation of the FCRA, is the indisputable fact, that when reviewing a consumer credit report, you will NEVER find any information regarding the person's performance on a residential rental lease contract in their consumer credit report.
The fact that there's never any information in a consumer credit report that addresses a person's performance on a residential lease contract speaks directly to the fact, that the FCRA is not, and was never intended to be used as a tool in renting residential real estate.
Consequently, it's my opinion, that there is absolutely no legal basis upon which a landlord (or their licensed real estate agent) may either demand, or even request that an applicant for tenancy provide a credit report as a required condition for consideration to become a tenant.
Should Applicants Give Permission?
Since the only way a consumer credit report may be obtained, as outlined in § 604. Permissible purposes of consumer reports [15 U.S.C. § 1681b] which (in part) says:
(a) In general. Subject to subsection (c), any consumer reporting agency may furnish a consumer report under the following circumstances and no other:
(1) In response to the order of a court having jurisdiction to issue such an order, or a subpoena issued in connection with proceedings before a Federal grand jury.
(2) In accordance with the written instructions of the consumer to whom it relates.
the question that begs an answer, is:
Should a tenant applicant give their permission to obtain their credit report to a landlord?
In light of the fact, that it's my opinion that the use of consumer credit reports are NOT a legal use of those credit reports, I would have to say, NO.
HOWEVER - let's explore this issue further based solely on the hypothesis that the use of a consumer's credit report is a legal use under the FCRA in considering a tenant for a residential rental.
Based solely upon that hypothetical, I would advise ALL tenant applicants to obtain and review a written copy of the landlord's credit requirements policy BEFORE deciding whether or not to authorize access to their credit report.
If the landlord's written credit requirements (a standard to which all applicants are equally considered) were clearly stated and were reasonable, the applicant would then have sufficient information to make the decision regarding whether or not to give their permission.
HOWEVER - if the landlord does NOT have a written outline of credit requirements, or if those requirements are unreasonable, a tenant prospect should refuse to provide permission since they don't have sufficient information to ensure that their credit report will be viewed properly and and evaluated equitably.
UNFORTUNATELY, landlords typically do NOT have written credit requirement standards, AND tenant applicants are never provided professional advice to ask for a copy of such credit requirement standards.
Thus, the cycle of the improper (and, I would argue - illegal) use of consumer credit reports in residential rentals continues.
The Impracticality Credit Reports in Residential Rentals
Let's suppose a hypothetical in which there has been a legally enforceable determination (e.g. a court decision) that says, the use of consumer credit reports is NOT a legal use for considering a tenant for residential rentals.
Would such a ruling damage or inhibit a landlord's ability to adequately vet a tenant applicant?
Landlords have many other means of evaluating a tenant applicant that are far more important than a consumer credit report. These other methods include a criminal background check (which I believe is far more relevant to a landlord than is a consumer credit report), employment verifications, as well as personal and business references.
Common sense dictates, that:
1. People need a place to live as much as they need to eat. Therefore, while they may miss payments on their credit card or a car payment here and there which will lead to a poor consumer credit rating, those same people are far less likely not to pay their rent. So, what good it is it to use a consumer credit report to vet a prospective residential tenant? None, in my opinion.
2. The majority of residential tenants would not be renting if they had "good" credit. They'd probably be buying. So, logic dictates that using a consumer credit report as an indicator of how good (or bad) a prospective tenant may be in the future is totally useless.
Potential Legal Liability
Something that few, if any landlords and their real estate agents ever consider, is by refusing a tenant prospect based on their consumer credit report, both the landlord AND agent open themselves up to significant legal liability.
The problem of legal liability stems from the circumstance being, that if they're sued by a tenant prospect who was refused tenancy based upon the results of their consumer credit report, and if neither the landlord nor the agent can produce the credit standards policy by which the applicant was evaluated BEING THE SAME ONE that they use to evaluate ALL applicants, AND if they cannot also prove that they've provided a copy of this credit standards policy to every prospective tenant applicant, BOTH the landlord and their agent may face some very serious legal and financial consequences.
In the end, the use of consumer credit reports are very likely a legal abuse of the Fair Credit Reporting Act, as well as an creating an unnecessary potential major legal liability.
My advice . . . Don't use them.