Possible Changes to Tenant Background Checks

White House Aims To Change Tenant Background Checks and the Rental Market

With the declarations of a public health emergency for the Covid-19 pandemic set to expire in a few months, a "new normal" has arrived. However, the aftershocks of the pandemic's worst effects continue, and the rental market continues to be one of the most affected areas. Across the country, housing shortages continue to worsen, rents continue to rise, and many families and individuals face very real pressures when trying to find a place to live, from passing tenant background checks to the rigors of credit analysis. 

To combat these challenging conditions, the Biden administration has announced its new "Blueprint for a Renters' Bill of Rights" that would incorporate new consumer protections into regulations. The blueprint aims to provide agencies with a path toward developing new guidelines and rules that could expand access to housing, rein in improper and unfair real estate background checks, and lay the groundwork for controlling the rental crisis. With more than a third of all Americans renting their current residence, such changes could have far-reaching impacts—landlords should take note.

What potential changes could come down the pipeline in the coming months and years?

CFPB Looks to Further Regulate Background Checks

The Consumer Financial Protection Bureau will take the lead in examining the current state of background checks in the rental industry. Outdated information from old records that have since been sealed or expunged can negatively impact those seeking a place to live. The CFPB will look to regulate reporting agencies to ensure that the data they report is as accurate and up-to-date as possible. The agency may also explore ways to make it simpler to dispute the information that appears in a background check.

FTC and Other Agencies to Collaborate, Too

Along with the CFPB, the Federal Trade Commission, Federal Housing Agency, and others will coordinate to explore better ways to regulate how landlords use screening reports. These steps include giving tenants more options for disputing background check results, limiting the fees landlords may charge for screening and requiring more in-depth communications from landlords about screening.

As AI and algorithmic software continue to grow, so do concerns about using algorithms to evaluate creditworthiness and other aspects of suitability for renting. The Department of Housing and Urban Development will consider whether and how to regulate such algorithms and those who use them as part of the decision-making process. 

With the CFPB previously revealing that its analysis indicated screening agencies and landlords could be violating the FCRA with current procedures, those operating rental properties should pay close attention to the working groups currently forming. Although it may be many months before any new opinions or regulations come into force, changes at the federal level would affect every landlord in the nation. For continued compliance, anyone using tenant background checks should be ready to adapt to avoid potential liabilities whenever the government releases its final reports.