Landlords Must Comply with Federal Credit Law

Posted on Monday, July 23, 2018

Landlords often use consumer reports to evaluate rental applications. However, they must comply with the Fair Credit Reporting Act (FCRA). This Act protects the privacy and ensures that the information supplied by consumer reporting agencies is as accurate as possible.

One of the requirements of the law: If a landlord denies a rental application based on information in an applicant's consumer report, the landlord must provide an "adverse action notice" telling the person the reason for the denial.

What's Included?

A "consumer report" may contain information about a person's credit history, character, general reputation, rental history and lifestyle. Specifically, it may include:

Credit information from a credit bureau, such as Trans Union, Experian and Equifax or an affiliate company;
Information from a tenant-screening service that describes the applicant's rental history based on reports from previous landlords, eviction files or housing court records.
A report from a reference-checking service that contacts previous landlords or other parties listed on the rental application on behalf of the rental property owner.

   To be covered by the FCRA, a report must be prepared by a consumer reporting agency -- a business that assembles such reports for other companies. The most common type of agency is a credit bureau.


When a prospective tenant fills out a rental application, it's common for landlords to ask for personal, employment and previous landlord references. When dealing with references, keep in mind that a reference verified by a landlord is not covered by the FCRA. However, a reference verified by an agency hired by the landlord to conduct the verification is covered by the law.

An "adverse action" is any action a landlord takes that is unfavorable to the interests of a rental applicant. Some common examples:

Denying an application.
Requiring a co-signer on the lease.
Requiring a deposit that would not be required for another applicant or requiring a larger deposit.
Raising the rent to a higher amount than another applicant would be charged.

Let's say you take an adverse action, which is based solely or partly on information in an applicant's consumer report. The FCRA requires you to provide a notice to the consumer that must include:

1. The name, address and telephone number of the agency that supplied the consumer report, including a toll-free telephone number for credit reporting agencies that maintain files nationwide.

2. A statement explaining that the credit reporting agency supplying the report did not make the decision and cannot give the specific reasons for it.

Discrimination Laws

     While you are allowed to screen and evaluate potential tenants, federal laws bar landlords from discriminating on the grounds of race, religion, sex, ethnic background, and disability.
     Some state and local laws add protections to include marital status, sexual orientation, children, and age.

3. A notice explaining the individual's rights to dispute the accuracy or completeness of any information the credit reporting agency furnished and the consumer's right to a free report from the agency upon request within 60 days.

Landlords who fail to provide required disclosure notices can be sued for court costs, reasonable legal fees and punitive damages. Additionally, the Federal Trade Commission and other federal and state agencies can sue landlords for non-compliance and obtain civil penalties.

However, a landlord who inadvertently fails to provide a required notice in an isolated case may have a defense. In order to be successful, it must be demonstrated that at the time of the violation, the landlord maintained reasonable procedures to assure compliance with the law.

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Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.

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