The Consumer Financial Protection Bureau issued new guidance last week aimed at one of the most problematic practices leading to widespread errors in tenant background checks, the subject of a joint investigation by The Markup and The New York Times last year. Companies that match potential renters to public records, the agency said, should ensure that a renter’s name is not the only factor used to determine identity.
Access Denied: Faulty Automated Background Checks Freeze Out Renters
Computer algorithms that scan everything from terror watch lists to eviction records spit out flawed tenant screening reports. And almost nobody is watching
Other information, such as a date of birth, Social Security number, or address should be used to corroborate the records, the CFPB advised.
The tenant screening industry provides landlords with background checks on potential tenants—often a major factor in whether a prospective renter gets a home. The agency cited our findings, which revealed that these reports often contain inaccuracies, preventing those affected from securing housing or a job.
“An increase in housing instability and financial distress caused by inaccurate consumer reporting information could undermine the nation’s efforts to recover from the pandemic,” the bureau said in its opinion.
This is particularly true for people of color. Just over two dozen last names are shared among 12 million Latinos in the U.S., for example. Name-matching systems also have more trouble with multiple last names, which are also common for Latinos.
In one instance The Markup and The New York Times found, a man named Marco Fernandez sued a tenant screening company after initially being denied an apartment because information from a man named Mario Fernandez Santana was included in his background report. Fernandez Santana was a Mexico resident on a U.S. federal watch list of terrorist or drug trafficker suspects, while Fernandez, who lived in Maryland, worked for the U.S. government with top-secret security clearance. The company denied the allegations, and the case is ongoing.
Advisory opinions are meant to clarify companies’ “legal and regulatory obligations.”
Relying only on a name match could put a screening company in violation of the Fair Credit Reporting Act, the CFPB opinion said, which requires “reasonable procedures” to ensure a consumer report’s accuracy.
The Consumer Data Industry Association represents many of the industry’s background check companies. Eric Ellman, senior vice president for public policy and legal affairs, said the association was still reviewing the opinion.
“We appreciate the dialogue that we have with the CFPB,” Ellman said. “We look forward to continuing that dialogue with the bureau on a variety of issues.”
“For families that live paycheck to paycheck, being denied housing as a result of a screening report’s inaccuracies could strain much needed resources and deplete a household’s savings,” Brown said.
Six other senators earlier this year wrote a letter to the CFPB on the same topic, also citing The Markup and The New York Times’ investigation.