by Paul MankinDoes A landlord or property manager need to provide an adverse action notice if you are denied a residential rental?
In a word: yes. Under the Equal Credit Opportunity Act (ECOA), anyone regularly involved in reviewing consumer credit or credit-related information for the purpose of deciding whether to approve an application must provide a certain type of notice anytime an adverse action is taken—i.e., when an application is denied or when one is approved with different terms than those for which the applicant applied. This rule applies to landlords of both business and residential rentals when an applicant is denied tenancy or when an application is approved with conditions, such as an additional deposit, or additional lease terms due to a finding that the applicant is “higher risk” than normal.
A tenancy application denial or modified approval is typical based on either a specific reason, such as the applicant’s lack of regular or sufficient employment, or on the general results from a consumer reporting agency, which may be a creditor reporting agency—e.g., TransUnion, Experian, or Equifax—or another type of consumer reporting agency.
When the denial or term modification is based on a specific reason, the specific reason must be disclosed to the applicant in an adverse action notice. A notice of this type should include: the landlord’s name and contact information, the applicant’s name and contact information, a statement of denial or conditional approval, and the specific reason for the adverse action. The notice must also include the source of any report or other information that informed the landlord’s decision along with the timeframe in which the applicant may request a copy of that information.
The reason provided must be specific enough to inform the applicant of the nature of the landlord’s concern. Specific reasons for adverse actions on rental applications commonly include: temporary or irregular employment, unable to verify employment or income, length of residence, no credit file, delinquent past or present credit or rental obligations, bankruptcy, criminal record, eviction filing or judgment, garnish, foreclose, or other related judgment.
When a tenancy application denial or conditional approval is based on a consumer report, certain information about the reporting agency and each report must be disclosed to the applicant in an adverse action notice. A notice of this type should include: the landlord’s name and contact information, the applicant’s name and contact information, a statement of denial or conditional approval, and the fact that the application is being denied or conditionally approved based on the information gathered from a consumer reporting agency.
While the notice need not include specific reason(s) for the adverse action, it must communicate to the applicant enough information as to enable the applicant to understand the type of information reported about them and where it came from so the applicant can follow up on any confusing or potentially erroneous reports on their own. The notice should at least include the name of any reporting agency that provided a report, the reporting agency’s address and contact information, and the release of liability from the reporting agency in regards to the landlord’s decision. The notice should also make clear that the applicant has 60 days to request a copy of the report from the reporting agency.
Some landlords use applicant screening agencies rather than running credit checks and screening applications themselves. When a screening agency in involved, a landlord is not required to give an applicant a copy of the tenancy background check, but they must let the applicant know from which screening agency the background check can be obtained, as well as the fact that the copy must be requested within 60 days. Since the landlord does not run the consumer reports itself, it doesn’t need to name the reporting bureau(s). Rather, the consumer must obtain that information from the screening agency.