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Blog Post | April 27, 2023

CFPB To Tenants: We’ve Got Your Back

Campaign FinanceConsumer ProtectionHousingIndependent Agencies
CFPB To Tenants: We’ve Got Your Back

In January, the White House issued what it claimed was a robust plan to address the rental housing crisis. This plan followed months of organizing from the tenant-led Homes Guarantee Campaign, which had urged Biden to sign a draft executive order that would crack down on corporate landlords, regulate rents in federally-backed properties, and extend key legal protections (like just cause eviction) to millions of tenants nationwide.

Unfortunately, Biden’s final “renter protection plan” was a far cry from the robust executive order backed by the Homes Guarantee campaign. As we’ve written on this blog, the White House ultimately caved to a well-funded lobbying push by the real estate industry to forgo an executive order in favor of non-binding, buck-passing suggestions for federal agencies and industry trade groups.

Fortunately, not all hope is lost. One of the agencies that Biden has decided to pass the buck to – the Consumer Financial Protection Bureau (CFPB) – is led by one of his best appointees: Rohit Chopra. As I’ve noted before, Chopra has a strong track record of cracking down on corporate predators and delivering much-needed relief for consumers. Here’s what you need to know about what Chopra and the Bureau are doing to protect tenants.

CFPB Takes Aim At Error-Laden Background Screening Industry

Though the CFPB’s statutory authority limits its ability to regulate the rental market, the Bureau has found a key area where its consumer protection powers can be applied to housing: the tenant screening industry.

On February 28th, 2023, the CFPB and Federal Trade Commission (FTC) issued a joint Request For Information (RFI) asking members of the public to share how tenant background checks (which landlords purchase from a screening company to vet prospective tenants) may be increasing barriers to access and driving discriminatory outcomes for consumers in the rental housing market. In an accompanying blog post on its website, the CFPB noted it had previously received thousands of complaints about these background checks being riddled with inaccuracies and incorrect information, leading to many prospective tenants paying higher security deposits or being denied housing altogether. 

Specific information from tenants and screening companies sought by the current RFI includes:

  • How accurate tenant background checks actually are, especially regarding criminal and eviction records.
  • Whether and how renters know if they’ve been denied housing or charged more in rent because of a background check.
  • Challenges renters face when trying to correct information in a tenant background check.
  • What information goes into calculating a tenant’s “risk score” rating, and how these rating products are marketed to landlords.

Crucially, the CFPB wasn’t pushed into action by the White House – to the contrary, the Bureau has had its eye on the tenant screening industry for a while. Since 2019, the Bureau has collected over 26,700 complaints about tenant screening through its Consumer Complaint portal. This past November, CFPB released two reports analyzing these complaints and the screening industry more broadly, finding that tenant background checks “too often […] are filled with largely unvalidated information of uncertain accuracy or predictive value.” The Bureau supplemented its consumer complaint data with existing legal cases, academic research, and a survey of tenant screening practices at 17 leading firms.

Key findings of the CFPB’s reports on screening industry complaints:

  • The most frequent consumer complaint concerns incorrect information showing up on renter’s background checks. 
  • Common inaccuracies include reports containing information that belongs to someone else; outdated information; and inaccuracies about criminal records and evictions that have not been corrected. Examples include:
    • Name-only matching that confuses the prospective tenant with someone else of the same name (the risk of this error is particularly high for Hispanic, Asian, and Black applicants). 
    • Information on eviction filings that excludes crucial details, including potential retaliation by landlords against tenants asserting their rights and filings that were later withdrawn or resolved after the landlord received payment. 
    • Misclassified criminal cases (e.g. a misdemeanor charge being erroneously classified as a felony) and expunged or sealed convictions appearing on an applicant’s background check. 
  • Prior rental payment history is frequently excluded from background reports and tenant risk scores, despite its obvious relevance to screening prospective tenants.
  • Landlords frequently pass the cost of generating a tenant background check onto tenants in the form of application fees (which range from $40 to $59 on average). An estimated 68% of renters nationwide are forced to pay these fees, which have become a surging profit source for corporate landlords, in order to apply for rental housing. 
  • Landlords rarely share screening criteria with prospective tenants and often fail to notify applicants on how to acquire a screening report or dispute inaccurate information. 

With the information gathered from these two reports and the current RFI, the CFPB will be able to quickly take regulatory and enforcement action to crack down on one of the biggest hurdles for tenants today.

Two Regulators Are Better Than One

Rohit Chopra isn’t alone in this fight against background screening companies and their sloppy data collection practices. The FTC, whose Chair Lina Khan and top consumer protection staffer Samuel Levine are both former Chopra aides, is working closely with the Bureau on the current RFI and any enforcement actions that may result from it. This inter-agency cooperative approach not only provides the CFPB with much needed-backup (especially as the Bureau faces an unprecedented political and legal assault from Big Business), but also gives the Bureau a partner with significantly broader statutory authority and more robust enforcement power. 

Facing Familiar Foes

The joint RFI on tenant screening pits the CFPB and FTC against several corporate lawbreakers they have previously encountered.

One such company is credit reporting giant TransUnion, one of the 17 screening firms included in the CFPB’s 2022 tenant screening industry study. The CFPB sued TransUnion last year for repeatedly engaging in deceptive marketing tactics and violating a 2017 law enforcement order with the Bureau. Credit reporting giants Experian and Equifax, which also offer tenant screening services, have also previously sparred with the CFPB for violating federal consumer protection laws.

More recently, Chopra and the FTC have gone after TransUnion for inaccuracies in tenant screening by two of its subsidiaries. Here, it appears that Chopra’s interagency collaboration with the FTC is paying off: TransUnion recently revealed to investors that it was close to settling these cases, after the CFPB informed the company last July that it had “attained the necessary authority” to conduct a joint enforcement action with the FTC.

Two other firms included in the CFPB’s industry sample will also be familiar faces to the FTC: AppFolio and RealPage. The former paid a $4.25 million settlement to the FTC in December 2020 for failing to ensure accuracy in tenant screening reports, while the latter’s participation in a rent-hiking collusion scheme has led multiple members of Congress to call for an FTC investigation of RealPage for anticompetitive practices.

Industry-Backed Republicans And Big Real Estate Lobbyists Cry Foul

Like many of Chopra’s other pro-consumer efforts, the CFPB’s investigation of the tenant screening industry has prompted backlash from Big Business. Major real estate industry trade groups – including several we’ve previously profiled as fronts for the corporate landlord lobby – are decrying the CFPB’s scrutiny of the tenant screening industry. You won’t be surprised to learn that these same groups count major screening companies among their members. 

  • The National Multifamily Housing Council (NMHC), a lobbying group that opposed the Biden administration’s eviction moratorium and represents the largest corporate landlords in America, has criticized the CFPB’s RFI for “unduly interrupt[ing] necessary operational and property management practices.” In a March 20th blog post, NMHC said it would respond to the RFI with comments that “highlight the importance of resident screening tools for housing providers and explain the myriad practices and protections that already ensure screening meets fair housing and other requirements.” According to NMHC’s directory, the group’s members include seven tenant screening firms profiled in the CFPB’s 2022 report on tenant screening: Appfolio, Entrata, MRI Software, RealPage, Saferent, TransUnion, and Yardi Systems. 
  • The National Apartment Association (NAA), a landlord lobbying group that openly boasted about killing the Homes Guarantee-backed executive order on tenant protections, has promised to “push back on federal interference in the landlord-tenant relationship”. In a March 8th statement on the RFI, NAA called current screening tools “critical to protecting the interests of housing providers, their employees and residents” and submit pro-industry comments to the RFI. Multiple tenant screening companies are top sponsors of NAA, including AppFolio, MRI Software, RealPage, Entrata, and Yardi Software.
  • Though it has yet to weigh in on the CFPB’s RFI, the National Association of Realtors (NAR) – the biggest real estate and landlord lobbying group in the country – has a partnership with tenant screening company Rental Beast and offers the company’s screening engine software to all of its 1.5 million members. NAR has previously lobbied against the federal eviction moratorium, Homes Guarantee executive order, and state and local tenant protections and rent stabilization laws.

The CFPB’s tenant screening RFI has also attracted criticism from at least one Republican member of Congress: House Financial Services Committeemember Warren Davidson. In a March 1st letter to Chopra, Davidson – who chairs the Housing and Insurance subcommittee – claimed that the Bureau was “overstepping its authority” by releasing its reports on tenant screening and warned that efforts to regulate the industry would increase rents and allow violent criminals to terrorize multifamily neighborhoods. 

  • According to FEC records, Davidson has received at least $28,000 from NAR, $10,000 from NMHC, and $8,500 from NAA over his six-year-long Congressional career. He has also received $14,500 from Experian and $2000 from TransUnion.

Davidson is among the many Republicans on the House Financial Services Committee who have relentlessly attacked Chopra and the CFPB on behalf of corporate lawbreakers and lobbyists for the last two years. Led by Chair Patrick McHenry, many of these other anti-CFPB lawmakers have also received significant donations from the real estate and tenant screening lobbies:

  • Patrick McHenry: Over his 18-year congressional career, McHenry has received at least $59,000 from NAR, $48,500 from NMHC, $22,500 from NAA, $29,000 from Transunion, $41,500 from Experian, and $1000 from Equifax. 
  • Blaine Luetkemeyer: Over his 14-year congressional career, Luetkemeyer has received at least $55,000 from NAR, $50,000 from NMHC, $40,000 from NAA, $20,500 from Transunion, $38,500 from Experian, and $15,000 from Equifax. 
  • Bill Huizenga: Over his 12-year congressional career, Huizenga has received at least $55,000 from NAR, $47,000 from NMHC, $31,000 from NAA, $19,000 from Transunion, and $34,500 from Experian. 
  • Ann Wagner: Over her 10-year congressional career, Wagner has received at least $55,000 from NAR, $35,000 from NMHC, $43,500 from NAA, $16,500 from Transunion, $37,500 from Experian, and $15,500 from Equifax. 
  • Andy Barr: Over his 10-year congressional career, Barr has received at least $42,000 from NAR, $47,000 from NMHC, $36,000 from NAA, $13,000 from Transunion, $32,500 from Experian, and $3,500 from Equifax. 
  • French Hill: Over his 8-year congressional career, Hill has received at least $43,000 from NAR, $45,000 from NMHC, $33,500 from NAA, $16,000 from Transunion, $31,500 from Experian, and $1,500 from Equifax. 

Follow the money, and the GOP’s reasons for going after Chopra’s pro-consumer agenda become quite clear. 

The Clock Is Ticking

With just a month until the RFI closes, time is running out to submit comments on tenant screening to the CFPB and FTC. The real estate and screening industries have publicly declared they will fight any regulatory action tooth-and-nail. It is incumbent on tenants and tenant advocates to make their voices heard and share their thoughts with Biden’s best regulators. 

SUBMIT A COMMENT ON TENANT SCREENING TO THE CFPB AND FTC BY MAY 30, 2023: https://www.regulations.gov/commenton/FTC-2023-0024-0002

Photo Credit: Shedrick Pelt/People’s Action

Campaign FinanceConsumer ProtectionHousingIndependent Agencies

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