New Rules for Property Managers Pulling Credit Reports

The following post was published by VAR alerting members about new changes to the law impacting individuals who use tenants’ credit reports as part of the rental process. 

IMPORTANT: New law affecting property managers pulling credit reports

Submitted by Amanda Arwood on September 23, 2011 – 11:27am

If you are a property manager who uses potential tenants’ credit reports as part of your rental process, you need to be aware of a significant change to the law.

This is straight from NAR’s September “Did You Know?”:

New Disclosure Requirements for Landlords Using Credit Reports

Recent amendments to the Fair Credit Reporting Act (“Act”) has caused the Federal Reserve Board and the Federal Trade Commission to amend their rules (“Rules”) to now require entities who take an “adverse action” based on a credit score in a transaction with a consumer (such as requiring a larger security deposit) to now disclose this fact to the consumer. These amendments reflect the new content requirements added by section 1100F of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Rules only require disclosure if the action is based on a “consumer report”, as defined within the Act. While “Adverse Action Notice” requirement in the Act has existed for creditors since 1996, the Rules now require notice if an action based on the consumer’s credit score results in less favorable terms to the consumer than the most favorable terms available to a substantial proportion of consumers. For a landlord, an adverse action would include the following: denying the consumer’s application; requiring a co-signer to a lease; requiring a higher security deposit; or requiring the payment of an increased rent amount.

The Rules only apply if the “adverse action” is taken pursuant to the consumer’s credit score. The notice that the landlord must provide to the consumer will need to include the following:

  • The credit score that the landlord used in making the decision and the entity that created the credit report
  • The range of possible scores within the model used
  • All of the key factors that adversely affected the score, not to exceed four factors; however, if one of the factors is the number of credit inquiries made, then the list can include up to five factors; and
  • The date of the credit report

The reporting requirement became effective on July 21, 2011.

2 thoughts on “New Rules for Property Managers Pulling Credit Reports

  1. Kim:
    Thanks for sharing this. I attach a “Rental Criteria” sheet to the application forms that I leave in the house which covers the requirement to disclose. I also send a form letter to applicants that indicates that the individual(s) were rejected on (1) credit (2) pets (3) multiple applications received and owner accepted another individual. However, I did not know about the additional information that is not required on this letter.
    It concerns me that if you had not shared this and I had not taken the time to scroll down through your email that I would not have known about this change. (I’ll bet 95% of the area property managers will not read this and will not know about these changes.)
    How did you receive this notification?
    How can I make sure that I receive up-to-date information regarding property management?
    Again, thank you for sharing this critical information. EXCELLENT WEBSITE!

  2. Jo Anne, I’m happy you found this post helpful! VAR does a great job of posting information regarding property management so if you haven’t already, log into your VAR account and ask to become part of the property management group. Alerts such as this one will come to you in a daily digest format so you can be sure to always have the latest information about rules and regulations.

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