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Financial Services Law Insights and Observations

CFPB highlights tenant background check problems

Federal Issues CFPB Consumer Finance Consumer Complaints Landlords Dispute Resolution

Federal Issues

On November 15, the CFPB issued two reports discussing issues related to the tenant background check industry. The Consumer Snapshot: Tenant Background Checks bulletin outlines difficulties that prospective renters encounter in connection with a landlord’s use of a tenant screening report, based on complaints submitted to the CFPB and CFPB-commissioned qualitative research. The Tenant Background Checks Market Report is based on data from industry research, legal cases, academic research, the CFPB’s market monitoring, and other third-party sources, and focuses on publicly available information from a sample of 17 tenant screening companies that offer services to landlords across the U.S. According to the Bureau, the reports describe how errors in these background checks contribute to rising costs and barriers to quality rental housing. The Bureau’s analysis of over 24,000 complaints highlights renter challenges associated with the industry’s failure to remove wrong, old, or misleading information or to conduct adequate investigations of disputed information.

Highlights of Consumer Snapshot: Tenant Background Checks include:

  • More than 17,200 of the approximately 26,700 complaints related to tenant screening received by the Bureau from January 2019 through September 2022 were related to incorrect information appearing on a prospective renter's report.
  • Renters who submitted complaints about tenant screening reports described difficulties finding stable and secure housing due to negative information that was inaccurate, misleading, or obsolete.
  • The experiences of most applicants who encountered inaccurate or misleading information about evictions and rental debt in their reports indicate that the presence of eviction records has a high likelihood of leading to outright denials of rental housing.
  • Inaccuracies in criminal records may have an outsized impact on Native American, Black, and Hispanic communities as they are disproportionally represented in the criminal justice system.

Highlights of the Tenant Background Checks Market Report include:

  • The coverage of rental payment history in the consumer reporting system is estimated to range between 1.7 percent to 2.3 percent of U.S. renters.
  • Approximately 68 percent of renters pay application fees when applying for rental housing, which are often used to cover the cost of tenant screening.
  • Market incentives generally value comprehensiveness of derogatory information at the expense of accurate information.
  • There may be a significant possibly that tenant screening reports overstate the risk of renting to any given applicant.