Landlord Credit Bureau

Legal Framework USA

Legal Framework USA

Summary1
 

Under US federal law (i.e. the Fair Credit Reporting Act or “FCRA”), landlords and property managers can report tenants’ rent payment habits (positive and negative) using the LCB platform. The FCRA does not require landlords and property managers to obtain consent from the tenant to report such information.

State and local laws may contain further stipulations, in particular temporary prohibitions on reporting unpaid rent during the COVID-19 pandemic. Please confirm with your local landlord & tenant housing office.

Under federal requirements: For any tenant, applicable privacy and consumer protection legislation enables landlords to report to LCB without notice or consent, so long as the information provided is accurate and complete and tenants’ disputes of the accuracy of the furnished information is investigated as required by applicable law (which may also include state law obligations).

The Details
 

Responsible Tenants Benefit From LCB:

For the vast majority of tenants, LCB offers significant benefits. Tenants can finally build credit by paying rent and create a Tenant Record to help them receive priority for future housing. Even if a tenant is having financial difficulty, as long as they communicate with their landlord and create a reasonable payment plan, they can still receive the same benefits. It is only tenants who choose to be delinquent and choose to not communicate with their landlord to create a plan that will find there is accountability and consequences for their choices.

Rent is many consumers’ largest single monthly payment, but to their detriment it is rarely reflected on their credit report:

  1. LCB facilitates tenants to positively impact their credit reports through the inclusion of rent payments.
  2. LCB assists consumers new to credit (e.g., young people) and new to the United States (e.g., immigrants) with building a credit file and gaining access to credit.
  3. LCB enables consumers with thin credit files to positively impact their credit reports and thus unlock credit and better rates for credit.
  4. For tenants with poor credit, but a history of always paying rent, they find it harder to secure housing. LCB enables them to show potential landlords that despite a low credit score, they are a responsible tenant and should be rented to.
  5. Relevant to COVID-19 and beyond, LCB enables rent deferral agreements and payment plans to be registered which then enables tenants to create a positive tenant record that they can use when applying to rent in the future AND still help strengthen their credit rating despite unexpected financial difficulties.
  6. From a housing supply and quality standpoint, LCB helps increase the supply and quality of rental housing for responsible tenants. LCB substantially reduces the risk and cost of delinquent tenants which encourages more rental housing to be created, enables smaller landlords to afford to continue providing rental housing (i.e. basement suites), and enables all landlords to afford more repairs & improvements and even reduced rent prices. The small percentage of tenants who are intentionally delinquent, cost the rental industry over $30 Billion per year in the USA which hurts the housing supply for everyone. 

LCB’s goal is for all parties to fulfill their responsibilities, act responsibly and for both landlords and tenants to benefit as a result.

Landlords May Report To LCB:

LCB includes three primary divisions accessible within the platform: 1) a recordkeeping service for landlords’ internal recordkeeping purposes whereby such tenant’s personal information is not collected, used, nor disclosed, except potentially with the applicable tenant; 2) a Reporting Agency for when a tenant gives consent or consent is not required; and 3) a portal service through which landlords and tenants are able to share rent payment habits with other Reporting Agencies.

It is well established practice for landlords to report tenant information to collection agencies and share that information with Consumer Reporting Agencies, also known as Credit Bureaus, such as Equifax and TransUnion for the purpose of collecting debts and mitigating fraud. Reporting to Credit Bureaus may happen indirectly through collection agencies or directly by landlords. While other Credit Bureaus may have chosen to not deal directly with landlords, LCB does deal directly with landlords of all sizes. LCB, Equifax, TransUnion and Experian are all Consumer Reporting Agencies in the United States.

The FCRA and consumer protection and privacy law enable landlords to report to LCB without consent, so long as the information provided is accurate and complete and tenants’ disputes of the accuracy of furnished information is investigated as required by law.

Consumer Reporting Agencies are subject state and federal law. LCB complies with, and in several instances exceeds, the requirements under that legislation.

Blacklists are illegal. LCB does not maintain any blacklists. LCB collects and reports both positive and negative information, provides tenants free access to their records, and provides several dispute mechanisms. Reporting tenant information to other companies which are not a Consumer Reporting Agency (CRA) and do not have the requisite consumer protections, is likely illegal and may create personal liability.

LCB’s built in and automated processes protect landlords and tenants using the platform.

Landlords May Access Tenant Records From LCB:

The ability for housing providers to screen their applicants for rental history, credit and tenancy-worthiness and the practice of providing rental history to other landlords is recognized as an accepted and established practice throughout the industry.

LCB is legally able to share records and landlords are entitled to view tenant records in connection with extending credit as landlords do, collecting a debt, or in connection with the tenant wanting to enter into or renew a tenancy agreement. When landlords certify that they are accessing tenant records from LCB for these limited permissible purposes and satisfies LCB’s requirements for credentialing, they do not need to get written consent from the tenant under US federal law, but may under some State laws. However, LCB requires landlords in every state to have obtained consent prior to receiving tenant records in order to confirm they have a permissible purpose.

After accessing tenant records from LCB, if a landlord rejects an applicant, increases the rent or deposit, requires a co-signer, or takes any other adverse action based the tenant records from LCB, the landlord needs to give the applicant or tenant notice of that fact.

Accuracy Of Data:

Before allowing users to contribute data, LCB verifies all user’s identification, using document submission and/or a secure process provided by Equifax. LCB does not allow information to be contributed anonymously. LCB only handles information from landlords and tenants who have had their identity and legitimate purpose verified.

Users contractually agree to only report factual information and to only use LCB for a valid purpose, or risk personal liability.

LCB also maintains a record of anyone who contributes or views data.

Protections For Tenants:

In addition to the preceding protections, both landlords and tenants are given the opportunity to provide information in a way that allows all sides to be heard and saved on the Tenant Record.

Tenants may dispute information that a landlord has provided by submitting a dispute to LCB or directly to the landlord. If the tenant disputes information directly to the landlord, the landlord may contact LCB for assistance.

LCB proactively handles notifying tenants, provides free annual access to review and monitor records, and if information is disputed, there are multiple mechanisms in place to handle such disputes. LCB will then investigate.

Further, tenants are provided a grace period before data is shared with other credit bureaus, so that tenants have time to review their record and make sure all information is accurate, and to pay any debts or agree to a payment plan.

For Further Information:

Privacy Policy
Terms of Use
Terms of Service

 


LCB recommends adding the clauses below to your Application for Tenancy and your Lease:

Specific Federal Law Regarding Use Of LCB
 

Federal:

Consumer Reporting Agencies (CRAs) in the U.S. are subject to the Fair Credit Reporting Act (FCRA) and in some cases similar state laws.

Section 623 of the Fair Credit Reporting Act (“FCRA”), and the corresponding “Furnisher Rule” published by the Federal Trade Commission (“FTC”) and Consumer Financial Protection Bureau” (“CFPB”), enable landlords to furnish tenant information to LCB so long as such landlord:

  • Provides accurate and complete information; and
  • Investigates tenants’ disputes of the accuracy of the furnished information.

Pursuant to FCRA Section 623(a)(1)(D), a furnisher of information (such as a landlord) has “reasonable cause to believe” that information is inaccurate if you have knowledge, other than allegations from the consumer, that would lead a reasonable person to doubt the accuracy of the information.

Note that FCRA Section 623 and the Furnisher Rule impose additional obligations on information furnishers that may apply to landlords who report to LCB.

The LCB platform assists users to comply with the above requirements but it is strongly recommended that all users read the guide accessible in the What Information Furnishers Need To Know summary guide.

For landlords using consumer reports

Further Discussion:

Consumer Reporting Agencies (CRAs) in the U.S. are subject to the Fair Credit Reporting Act (FCRA)2 and similar state laws. The law regulates consumer reporting agencies and “consumer reports” which are generally defined as certain information about individuals used to determine “eligibility” for consumer-initiated transactions.3 This definition includes credit and financial transactions but also rental history used to determine whether someone is eligible for a tenancy.4

FCRA defines “Consumer Report” as follows:

(1) In general. The term “consumer report” means any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for

(C) any other purpose authorized under section 604 [§ 1681b].5

Section 604 is the Permissible Purpose section listing all the authorized purposes for which a consumer report can be provided. The relevant section is:

(a) In general. Subject to subsection (c), any consumer reporting agency may
furnish a consumer report under the following circumstances and no other:

(2) In accordance with the written instructions of the consumer to whom
it relates.

(3) To a person which it has reason to believe:

(F) otherwise has a legitimate business need for the information

(i) in connection with a business transaction that is initiated by the consumer;6

A consumer report is any information that bears on the listed factors. Whether someone pays their rent clearly bears on credit standing as well as a number of the other factors. Other than information that is over a certain age,7 and information that discriminates on a prohibited basis,8 there is no restriction in FCRA or in any other law as to the information that may be in included a consumer report.

The Federal Trade Commission (FTC)9 has stated that rental data can be included in consumer reports:

“Reports about rental experiences such as consumers’ evictions, rental payment histories, or treatment of premises are consumer reports, if provided by a CRA, because they relate to the consumer’s “character, general reputation, personal characteristics, or mode of living.”10

The FTC opinion assumes that rental information is furnished to a CRA and then constitutes a consumer report when issued, which is subject to FCRA.

In the Fair and Accurate Credit Transactions Act of 2003 (FACT Act), Congress required the FTC to study:

whether there are any common financial transactions that are not generally reported to the CRAs, but that would provide useful information in determining creditworthiness, and what actions might be taken to encourage greater reporting of these transactions.11

Congress was concerned that some consumers with little credit history are missing out on the credit economy because they do not have robust credit reports. Congress wanted the FTC to study whether including “non-traditional” information would help consumers. The FTC concluded in its study:

The report concludes that there are common underreported transactions that could be useful in evaluating creditworthiness – in particular, rental payments and utility payments. It also concludes that there are certain barriers to reporting these payments that may or may not hinder efforts to encourage greater reporting. For rental payments, the main barrier appears to be the diffuse rental market and the lack of centralized data collection, which could be difficult to change. For utility payments, the barriers appear to be cost, some state privacy laws, and possible disincentives created by state regulatory systems. To the extent that state regulatory systems create barriers, these would need to be addressed at the state level. Despite these barriers, there are private sector efforts underway to capture and report this type of data. These efforts are still at the beginning stages. As they develop, the FTC will continue to monitor these efforts to determine whether they succeed in providing greater access to information about common unreported transactions.12 

The FTC has issued guidance for tenant screening companies.13

There is no federal law that requires the consent of a consumer to permit a landlord or property manager to report any information to a CRA.

The Consumer Financial Protection Bureau (CFPB) is charged with enforcing FCRA and issues a list of CRAs.14 Included in the list are Tenant Screening Companies. The CFPB also added the following consumer advice:

If you are applying as a tenant for a residential property, ask the management company for the name(s) of consumer reporting company it will be using to screen you. Contact the screener(s) to fact-check your information and dispute suspected inaccuracies as needed. A tenant screening report with negative information in it, such as prior housing evictions, could result in a rejected lease application, or it may get approved but with tough conditions inserted into the lease agreement such as requiring you to pay twelve months of rent in advance. If a landlord refuses to rent to you or charges you more because of something in a background check, be sure to know your rights.15

The “rights” referred to are listed in a CFPB blog that includes this statement:

Landlords can check your credit, criminal history, and even your rental history. They may ask your permission but they’re not required to.16

CRAs are not required to register with any government authority. The CFPB list of CRAs is developed by it. The CFPB list of CRAs is qualified as follows:

This list is current as of January 2020. It includes entities that have identified themselves as consumer reporting companies or have indicated they provide consumers access to their personal consumer reports when requested. The list incorporates information from the companies’ own self-descriptions that has not been independently verified by the Bureau. This list does not cover every company in the industry. It is not intended to be all-inclusive. Nor does it reflect determinations as to whether any particular entity is subject to the Fair Credit Reporting Act. Furthermore, presence on, or absence from, this list does not indicate whether the consumer reporting company is subject to the Bureau’s supervisory or enforcement authority. 17

 

1 Disclaimer: The information contained herein does not constitute, and is not intended to constitute, legal advice. This information is for general information purposes only. Information may not be the most up-to-date or address local requirements (e.g., city or state). This document contains third party links, LCB is not responsible for the content on such third-party websites.

2 15 USC 1681 et seq.

3 15 USC 1681a(d)

4 See https://www.ftc.gov/sites/default/files/documents/reports/40-years-experience-fair-credit-reporting-act-ftc-staff-report-summary-interpretations/110720fcrareport.pdf, P. 48 3(B)

5 15 USC 1681a(d)(1)

6 15 USC 1681b

7 15 USC 1681c

8 15 USC § 1691 et seq.

9 The FTC regulates consumer reports by tenant screeners and tenant screening companies. The CFPB regulates financial companies and FCRA. The two agencies coordinate their interpretations of the law.

10 https://www.ftc.gov/sites/default/files/documents/reports/40-years-experience-fair-credit-reporting-act-ftc-staff-report-summary-interpretations/110720fcrareport.pdf (P. 22)