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The problem with tenant screening reports

Most residential landlords rely on tenant screening reports to decide if lease applicants are good candidates. A property owner can see in a report if a prospective tenant has had steady employment and a history of paying bills on time. The report could also reveal whether the applicant owes unpaid rent from an earlier rental agreement or if another landlord has evicted them.

In theory, this sounds like a fair screening tool. After all, landlords want to rent to financially reliable tenants. The problem is that tenant screening reports can have mistakes that raise false red flags, influencing property owners to reject sound tenants or to require higher deposits. Someone with a critical error on their tenant screening report can have serious trouble finding a new home, but legal remedies are available.

What is a tenant screening report and how is it used?

Approximately 90% of landlords rely on tenant screening reports, according to the National Consumer Law Center (NCLC). These may include:

  • Rental history, including evictions
  • Rental debt
  • Employment and income history
  • Credit reports
  • Criminal history
  • Inclusion on the national terrorist watchlist
  • Required registration with a sex offender registry

Some tenant screening companies use confidential algorithms or formulas that plug in personal information to create a tenant score to present to landlords. These scores are meant to reflect how desirable a person will be as a tenant based on their past actions. ProPublica reported in Sept. 2021 that tenant scores are problematic because the companies usually keep them secret, and they are unregulated.

How can a tenant screening report hurt a lease applicant?

Tenant screening companies cull data from a variety of sources. It may be inaccurate or even belong to someone else with the same or a similar name. For example, eviction proceedings that were never finalized or may have been dismissed may show up, giving the tenant the “Scarlet E” – even though the eviction never actually happened.

Attorney Rudy Kleysteuber in his 2007 Yale Law Journal article dubbed inaccurate data in a tenant screening report “dirty,” information, defined as “contaminated by data points that do not in fact indicate whether a tenant is likely to pay or to create problems.”

Information taken from credit reports originating with the three major credit unions can be out of date or in error, as can information from any other source.

Does a tenant have the right to review the report and dispute the content?

In a word – yes. When a property owner denies a lease application based on a tenant screening report, because tenant screening companies are subject to the federal Fair Credit Reporting Act (FCRA) as consumer reporting agencies (CRAs), the landlord when denying an application should give the applicant the screening company’s contact information. The tenant has the right to ask for a free copy of the screening report.

The tenant can dispute false information in the report to the CRA (here, the tenant screening company), which triggers legal duties for the CRA to reinvestigate the accuracy of information received from third parties. Lease applicants may also be able to file complaints with the federal Consumer Financial Protection Bureau (CFPB) or the Virginia Office of the Attorney General. Sometimes they may want to go directly to the third-party source that supplied wrong information such as the court that released information that was supposed to have been sealed or expunged.

Can an attorney help?

Legal counsel can provide valuable assistance with various processes to correct errors in the report. For example, the three major credit unions can be contacted to correct inaccurate information from the credit report used in the tenant screening report. Or a lawyer could help with the dispute over accuracy with the CRA.

An important question for a lawyer is whether it is worth paying off a past due rent amount showing on the report. While it seems logical that paying rent arrears in the report should be the first step, if the report has other accurate information that a landlord would use to reject an application, it may not be the right decision to pay up.

Virginia’s new eviction expungement law took effect Jan. 1, 2022, that may allow certain unlawful detainer actions to be expunged without a court hearing where no order of possession of the premises was made. Or is there a criminal matter on the report that could be expunged or sealed under state law like an arrest or charge that never led to a conviction?

As of this writing, many federal, state or local governmental COVID-19-related tenant support programs have ended or may end soon. The rental market is in transition as evictions may rise and rent arrears that came due during the pandemic may become collectible again – but not always.

An attorney can inform a tenant about Virginia state and local laws that may provide added protections to those available federally, both related to the pandemic as well as to tenant screening reports generally. An example is a Virginia statute in force through June 30, 2022, that applies to larger landlords and forbids them from taking adverse action against applicants solely because of “payment history or an eviction for nonpayment of rent” during the COVID-19 pandemic.

Finally, legal counsel may be able to negotiate with a prospective landlord directly over the contents of the report being a barrier to a lease. For example, legal reasons exist for withholding rent or breaking a lease that the report may not reflect or the tenant’s backstory to the report’s contents may satisfy a landlord enough to sign off on a lease even without formal correction of the data.