On Nov. 15, the Consumer Financial Protection Bureau issued two eye-opening (at least to me) reports dealing with the tenant background check industry.

Participants in this industry sell information about prospective new tenants to landlords. Landlords pay a fee for the information, which they pass on to tenants in the form of rental application charges. There are a few big players on this stage and many (probably hundreds) of smaller companies marketing reports of various kinds to landlords.

CFPB says it received 26,700 complaints about tenant screening between January 2019 and September of this year. Per CFPB, the information being supplied to landlords and used by them to grant or deny tenant applications is often inaccurate, misleading or obsolete. Also per CFPB, the information making it into tenant background reports is seldom validated and frequently comes from data brokers who scoop up information electronically from a variety of sometimes unreliable public sources.

Some vendors of tenant background information provide only a pass/fail score, with no detail as to how that score was calculated. Others provide greater detail but, again, without verification. Even in reports with greater detail, information is rarely provided about a tenant applicant’s rent-paying history.

Furthermore, CFPB says evidence is lacking that the information being provided to landlords, including eviction and criminal reports, is predictive of future behavior. CFPB cites a common expression — “rent eats first” — to make the point that paying rent often takes priority over paying other bills, with the exception of utilities and cellphone charges.

Tenant background check companies are covered by the same law — the Fair Credit Reporting Act — that strictly governs the activities of the big three credit reporting agencies: Equifax, Transunion and Experian. This means landlords should be providing tenant applicants with adverse action notifications when an application is going to be denied based on information in a tenant screening

report.

These notifications should give the reason for the denial, the source of the information leading to the denial, and explain the applicant’s rights to challenge negative information. However, per CFPB, landlords routinely disregard the Fair Credit Reporting Act. And even if they comply with this law, tenant applicants don’t have enough time to track down misinformation in a screening report and get it corrected. They are busy trying to find a place to live.

Perhaps because there are so many companies involved in the tenant background check industry (as opposed to, say, having only three major credit reporting agencies to chase around), CFPB seems to be making no serious effort to sanction companies that are selling unreliable tenant information, violating the Fair Credit Reporting Act or otherwise abusing people trying to rent. This continues despite the fact that CFPB says these practices “contribute to difficulty finding affordable, quality housing and result in people living farther from school or work, paying more in rent and fees, and undermining household financial stability.”

The Federal Trade Commission may be modestly more aggressive than CFPB in going after scofflaws. A couple of years ago, the FTC reached a $4.25 million settlement with a California tenant background check company called Appfolio Inc.

This apparently out-ofcontrol situation has not escaped the attention of the Colorado Legislature. In 2019, the Legislature passed the Rental Application Fairness Act. This act places limits on application fees charged to tenants. It also prohibits landlords’ use of out-of-date information — seven years for rental or credit history and five years for criminal history (other than for crimes relating to methamphetamine or requiring registration as a sex offender). Similar to the Fair Credit Reporting Act, this law requires landlords denying a rental application to provide the applicant with a written notice of the denial and stating the reasons for the denial.

For tenant applicants who believe they are being victimized by misinformation in a screening report, seeking help from the Colorado attorney general’s consumer protection staff may be more effective than seeking help from a federal agency.