Possible Changes to Tenant Background Checks

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

Fair access to housing has been a banner cause among many groups in recent years. What first became a pivotal issue in the wake of the Covid-19 pandemic has become an area of sharp focus in government. Tenant background checks have come under scrutiny for potential changes. Some continue to express concern that discrimination unfairly prevents many people from finding affordable housing.

In 2023, the Biden administration took steps to address some of the concerns expressed by advocates nationwide. The process began with unveiling what the White House called a Blueprint for a Renters' Bill of Rights. The blueprint's goal is simple: provide goals that federal agencies can use as guidelines to formulate new rules and regulations.

The ultimate purpose of such efforts relates to expanding access to housing and reining in potentially unfair screening practices. Today, more than a third of all Americans rent their residence. If fully implemented, the rules currently under consideration could have far-reaching impacts on landlords.

Due to the increasing complexity of regulations in this area and the rapidly evolving regulatory landscape, backgroundchecks.com will no longer provide services to screen rental tenants. These changes are effective from September 2024 as we pivot to focus on our core markets.

Here's a short overview of what those changes may involve.

Federal Agencies Released Initial Guidelines in July 2023

Several months after initially releasing the Blueprint, the White House announced a wave of new actions related to the research and rulemaking at various agencies. Many agencies released new rules, guidelines, or comments to guide landlords regarding their responsibilities.

The Consumer Financial Protection Bureau (CFPB) states that landlords must provide tenants with a written notice of their rights. This notification is an obligation under the Fair Credit Reporting Act (FCRA). During public comment, many rental applicants expressed their experiences with unfair practices related to FCRA compliance in housing. The CFPB announced with the Department of Housing and Urban Development (HUD). The CFPB also continues additional efforts to rein in alleged inaccuracies in tenant reports.

Providers of public housing and those receiving government funding for affordable housing must now provide reasons for denying applications. Similar rules apply to housing providers that receive funding from the United States Department of Agriculture (USDA).

FTC and Other Agencies Continue Collaborating on Rulemaking

Alongside the CFPB, the Federal Trade Commission (FTC) and the Federal Housing Agency (FHA) have also been engaged in rulemaking processes since 2023. Research and public comment on how landlords use screening reports have been central to this process.

Additional efforts remain ongoing. Further changes may include more options for disputing background check results. Limitations on background check fees are also possible. Most importantly, the government emphasizes that landlords must communicate clearly and routinely with applicants about their screening reports. Further regulatory work to develop guidelines for algorithmic screening and AI tools remains ongoing.

Landlords must be aware of the changing regulatory landscape and the potential for an increased burden on their processes. Continued compliance during tenant background checks requires a clear understanding of FCRA obligations and the new rules emerging from the executive branch. Further changes may also be on the horizon. Review your procedures and explore whether you're operating within the boundaries of these new rules.