Federal Trade Commission Issues "Facts for Business" Guide on Complying with the Fair Credit Reporting Act

The Federal Trade Commission recently issued a "Facts for Business" guide to help landlords comply with the federal Fair Credit Reporting Act (FCRA). "Using Consumer Reports: What Landlords Need to Know" provides guidance for residential property owners who use reports from credit bureaus and tenant screening services in deciding whether to rent to consumer applicants.

Section 615(a) of the FCRA requires landlords, when they take an "adverse action" against a rental applicant based in any way on a "consumer report" from a "consumer reporting agency," to provide an adverse action notice to that consumer. In particular, the law requires landlords to provide tenant applicants with a notice that informs them about the adverse action, identifies the consumer reporting agency that provided the report that contributed to the landlord's action, and specifies consumers' rights under the FCRA.

Complying With The FCRA

The guide helps landlords by providing instruction on the key terms in the FCRA with examples, where appropriate. It states that a "consumer report" from a "consumer reporting agency" includes not only a credit report provided by a credit bureau (such as Trans Union, Experian, or Equifax), but also a report supplied by a tenant screening service of the applicant's rental history procured from prior landlords or housing court records. The guide states that "adverse action" includes not only a landlord's denial of a rental application, but also a landlord's action that imposes a burden not required of all tenants -- such as requiring a co-signer on the lease, requiring a deposit, or increasing the tenant's rent or deposit to a higher amount.

The guide also provides several examples to illustrate that the landlord must provide the notice if the adverse action in any way is based on a consumer report. For example, it discusses scenarios in which the landlord must provide the adverse action notice if it obtained a consumer report that played a factor in the landlord's action, even though its action is based primarily on an applicant's income or prior reputation as a tenant. Finally, the guide provides a road map for landlords to help them draft their adverse action notices, including which consumer reporting agency to name where there is more than one, what information to provide about the agency or agencies, and other information specified in the law concerning the consumer's rights under the FCRA.

FTC Staff FCRA Compliance Review

The amendment to Section 615(a) that requires adverse action notices by landlords who use consumer reports took effect in September 1997. As part of its ongoing program to enforce the amended FCRA, FTC staff recently completed a review of compliance with Section 615(a) by a number of residential apartment owners in several major cities. The review indicated substantial compliance, but disclosed that some landlords were not totally aware of some of the details of the FCRA or precise compliance methods as outlined in the guide. "Using Consumer Reports: What Landlords Need to Know" will assist in compliance efforts by this important group of businesses governed by the FCRA.

Your Opportunity to Comment

The Small Business and Agriculture Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards collect comments from small business about federal enforcement actions. Each year, the Ombudsman evaluates enforcement activities and rates each agency's responsiveness to small business. To comment on FTC actions, call 1-888-734-3247.

Copies of the complete "Using Consumer Reports: What Landlords Need to Know" guide are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.