The U.S. federal government is directing credit bureaus to clean up background check and credit reports, a move that could make it easier for renters to find housing.
The Consumer Financial Protection Bureau, the nation’s top consumer watchdog, recently issued guidance instructing credit-reporting companies to address inaccurate background check reports and “sloppy” credit file-sharing practices.
The CFPB said that background check reports must be “complete, accurate, and free of information that is duplicative, outdated, expunged, sealed, or otherwise legally restricted from public access.”
It also said that people are entitled to get all of the information in their credit file at the time they request it, along with the source or sources of information, including the original source.
Landlords conduct background checks when renters apply for housing, and employers do as well as during the hiring process. Inaccuracies about a person’s credit history, rental history, criminal convictions, and other details can result in a person losing a job opportunity or losing out on housing.
“Inaccurate, incomplete or obsolete information that appears in background screening reports can be really serious for consumers,” a CFPB official told MarketWatch. “It can mean that rental housing applications are denied, [or] they’d end up paying more for their housing, [or] employment applications can get rejected, [or] people can be passed over for promotions.”
And even if none of that happens, an erroneous or outdated report means that “consumers spend huge amounts of time and money trying to get things corrected,” the official added.
The CFPB’s guidance stems from an inquiry the agency and the Federal Trade Commission conducted nearly a year ago that found that renters were having problems with the screening process to rent a home because it was cumbersome, costly and rife with inaccuracies.
After the CFPB and FTC asked for comments from the public about the tenant screening process, one law firm noted in a public submission that it had “represented hundreds of consumers in 2022 in relation to inaccurate background and tenant screening reports,” with faulty information from consumer reporting agencies causing tenants to lose out on housing or become homeless.
The firm also attached several lawsuits to its comment, including one from an Arizona public-school teacher who was allegedly denied several apartments after spending $1,800 on nonrefundable application fees, thanks to multiple felony drug charges that were incorrectly added to a consumer report because an individual with the same birth date and first name had committed such crimes.
The criminal records in question involved an individual thousands of miles away in Cook County, Illinois.
“Background check and other consumer reporting companies do not get to create flawed reputational dossiers that are then hidden from consumer view,” Rohit Chopra, director of the CFPB, said in a statement. “Background check reports, and all other consumer reports, must be accurate, up to date, and available to the people that the reports are about.”
One credit-reporting company called the CFPB’s guidance a welcome development.
TransUnion
TRU,
one of the three major credit bureaus in the U.S., said that it “applauds” the CFPB for the additional guidance. In a blog post, TransUnion also noted that more accurate background checks help property owners and consumers because landlords would not need to resort to asking for higher security deposits, or raising rents, to protect their property.
Equifax
EFX,
and Experian did not respond immediately to a request for comment. Consumer reporting companies, such as the credit bureaus, are required by the Fair Credit Reporting Act to provide accurate information to consumers.
One landlord lobby group highlighted the link between the CFPB guidance and providing better access to rental housing.
“The National Rental Home Council acknowledges the need to ensure all residents receive the quality living experience they deserve,” David Howard, CEO of the National Rental Home Council, which represents the single-family rental industry, told MarketWatch.
“At a time when access to quality, affordably-priced housing has never been more important, NRHC encourages policymakers at all levels to work with single-family rental home providers to alleviate current and future housing supply challenges and address the needs of residents,” he added.
— Emma Ockerman contributed to this report.
How have background checks or credit reports affected your life? If you’d like to share your experience, write to readerstories@marketwatch.com. A reporter may be in touch.
See also: Biden takes new steps to protect renters — including helping them fix faulty tenant-screening reports
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