Having trouble finding a landlord willing to rent to you? It may be thanks to the tenant-screening companies that pull renters’ credit history, criminal records, eviction filings and more to present their risk to property owners — sometimes including erroneous or out-of-context data in the process.
The tenant-screening services, which larger corporate landlords may rely on more, have made an already competitive process of apartment hunting even more difficult for renters who receive a negative report based on potentially nebulous, hard-to-dispute criteria, according to two recent reports from the Consumer Financial Protection Bureau (CFPB).
And they’re increasingly being offered as a part of property-management platforms to landlords and property managers, with would-be tenants paying for the screenings through application fees.
“When a company produces a tenant background check report that is riddled with errors, it can cause serious harm to a family seeking housing,” CFPB Director Rohit Chopra said in a statement about the reports earlier this month. “These background reports are heavily used by corporate landlords that own an increasing share of rental housing in our country, so we are taking steps to ensure these reports do not contain false information.”
One of the CFPB’s reports charges that tenant-screening companies often over-include certain kinds of data, like criminal and eviction records, and underinvest in the procedures needed to filter out inaccurate or outdated information.
As far as what legislators and regulators can do about it, Sophie Sahaf, a policy advisor at the CFPB, said: “Make these background screeners do their job. They’re required to have adequate quality-control procedures.”
“A first basic goal is: Don’t put sloppy, bad, false data into these reports,” Sahaf said in an interview with MarketWatch.
The screenings can be as limited as a credit check and as expansive as a report on a tenant’s credit history, rental history, civil and criminal court records, and an assigned risk “score” based on the landlord’s own criteria or a company’s proprietary algorithms, among other determinants, Sahaf said.
But while they’re ultimately meant to protect landlords’ properties and pocketbooks, they’re also often based on information from third-party data brokers that compile public court records — including those with documented errors — and can’t always account for the complexities found within them, according to the CFPB.
“‘It can sort of feel like a Sisyphean battle to correct the errors as a renter.’”
— Sophie Sahaf, a policy advisor at the CFPB
An eviction filing, for example, may show up in a background check, but a filing only reflects the beginning of the removal process. The outcome of the eviction case, or even whether it was dismissed, might not show up in the report. Eviction cases that have been sealed or expunged have also allegedly cropped up in private databases and tenant background checks, and a single eviction record may appear as several different filings, Sahaf said.
“We’ve just been hearing a lot from people that there’s a mischaracterization of their eviction or other court record history, and I think it’s because there’s so much nuance there, and I think that can get lost,” Sahaf said.
It’s especially concerning that those records can be folded into an algorithmic scoring product, where a property owner or manager only sees a grade or score for a tenant, rather than the basis for it, Sahaf said. Meanwhile, rental payment history data that may be especially relevant to landlords “is overwhelmingly not reflected in the reports or algorithmic risk scores assigned to tenants,” the CFPB said in one of its reports, titled “Tenant Background Checks Market.”
Tenant-screening companies even appear to be inclined to put negative information in reports, even if it’s potentially inaccurate, the CFPB said in a press release about the reports.
Challenging a report or allegation in a background check, meanwhile, can be difficult for a renter, because they have to both discover which screening product their landlord is using and then go through a resolution process that’s sometimes non-responsive or faulty. That’s despite the fact that landlords are required to inform tenants of their right to dispute information in the reports via the Fair Credit Reporting Act — a notification that may help improve renters’ awareness of their background check and any errors within it.
“It can sort of feel like a Sisyphean battle to correct the errors as a renter,” Sahaf said.
The CFPB received approximately 26,700 complaints regarding tenant screening from January 2019 through September 2022, with the volume of complaints increasing each year, the agency said in another of its reports out this month, titled “Consumer Snapshot: Tenant background checks.” More than 17,200 of those complaints related to incorrect information, either due to information that didn’t belong to them, outdated information that legally should have been excluded, or inaccurate or misleading information relating to court records.
Concerning criminal backgrounds, the CFPB noted that “inaccuracies in criminal records may have an outsized impact on Native American, Black, and Hispanic communities as they are disproportionately represented in the criminal justice system.”
“Despite known issues with inconsistent public records systems across jurisdictions, many tenant screening companies conduct minimal manual verification of information and continue to report inaccurate and incomplete civil and criminal public records,” the CFPB said.
AppFolio, one of the 17 companies researched by the CFPB’s Tenant Background Checks Market report based on publicly available information, said in a statement to MarketWatch that the “cloud-based business management solutions provider for the real estate industry” does not itself make tenant screening decisions, which are ultimately up to property managers.
“We provide our property manager customers with background screening information and, while those customers ultimately make the decisions, we take seriously the role we play as a solutions provider in expanding opportunities for consumers around the country by providing accurate, complete and timely information,” AppFolio said. “We also understand the impact that data contained in reports can have on consumers. We are proud of our screening processes and procedures, which are designed to keep pace with changing industry guidance, legal requirements and consumer expectations.”
Other companies MarketWatch contacted for comment, including RealPage and Avail, did not immediately respond.