Apartment Associations Must Now Credential All Members Who Obtain Credit Reports, Or Do They?

Requirements for landlord’s running credit reports on prospective tenants continue to evolve. Credentialing is now required for all end users (landlords).

  • Monday, November 4, 2013

  General   Tenant Screening   Criminal & Eviction Checks   Tenant Credit Checks   

Members of Apartment Association Organizations across the United States enjoy the benefits of being part of a community. If you are a landlord and a member of an Apartment Association, then you have likely received notification in August 2013 about recent changes to how credit reports must be obtained. Most Apartment Associations are now required to credential all members (end users) who obtain credit reports on prospective tenants. What does credentialing mean? And more importantly, is there an alternative available to individual landlords who need credit and tenant screening services? Let’s first take a look at what the credentialing process looks like for a typical landlord.

A typical landlord will usually receive a memo in the mail from their Apartment Association indicating a 5-step process to continue asking for credit reports on prospective tenants. The first step is a lengthy end user application that you must fill out with a $60.00 to $100.00 setup fee. As part of the application, you have to dig up the rental property deeds or title documents showing all of the properties that you own. You may also be asked to provide a closing settlement statement for each rental property, or a rental property tax bill showing who owns the property. What’s more is that you will need to provide a voided bank check and copies of both your State ID and/or Passport. You will also need to provide the Apartment Association with copies of residential leases from each of your properties, a paper print out of the rental application received from the prospective tenant, and a letter of intent (on letter head) indicating the nature of your business, intended use, anticipated monthly usage, and whether your rental business you need credit reports for is local, regional, or national.

After you dug up everything, you will then need to schedule a site visit to inspect your house or small office that you use to manage your growing rental property empire. The site visit is mandatory and is required by the credit bureaus to be conducted at the location where tenant files and reports are kept, and this site visit must be completed before the applicant’s account can be activated. It’s a quick inspection that lasts about 45 minutes. Once the site inspection is completed, you will give your Apartment Association consent to obtain the applicant’s personal credit report, including a fraud risk evaluation and additional identify verification.

Why is this all necessary? Well, if you haven’t noticed the increase in criminal activity of individual’s information – then wake up! Credit fraud and identity theft has lifted everyone’s awareness and both the federal government and individuals are doing everything possible to protect themselves against these crimes. It’s good business too. As criminals evolve and become more sophisticated, the credit bureaus and our federal government must evolve accordingly. What this means to the individual landlord is more regulation and paperwork to counteract against these crimes to protect people’s private information. The site visit in particular validates that you are taking the proper safeguards needed to ensure the personal private information you are receiving is being protected and secured from persons who are not authorized to access the information.

So what is the alternative? Applicant initiated (direct to consumer) tenant screening services like VerticalRent (www.verticalrent.com) and AppSingular (www.appsingular.com) have emerged. The services offered by VerticalRent differ from the “traditional model” described above that Apartment Associations continue to offer individual landlords. The “new model” is that the consumer (tenant) orders the report on themselves and shares it with the landlord (or landlords) of their choice. Both models are regulated by the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq. VerticalRent and AppSingular have many obligations under the FCRA – just like the Apartment Association Organizations across this great nation. Notably, each model needs to identify each end-user (landlord) and the purpose for which the information is sought – before providing the tenant screening report to the landlord. Apartment Associations following the traditional model typically operate via snail mail and paperwork, whereas VerticalRent’s state-of-the-art software enables landlords (end users) and tenants (consumer) to verify their identify online through a series of questions and web-based forms (electronically). The benefits of electronic tenant screening and direct-to-consumer tenant screening services like VerticalRent should be viewed as an alternative means of finding reliable tenants who pay rent on-time and respect your property.

As a landlord, you have certain responsibilities during the tenant screening process that are also regulated and defined by the FCRA. Most notably, you must “…provide oral, written, or electronic notice of adverse action taken based in whole or in part on any information contained in a consumer (tenant screening) report.” Online tools like VerticalRent (www.verticalrent.com) make it quick and easy to issue an adverse action notice electronically with a few clicks of the mouse. The sample adverse action electronic form must include the name, address, and telephone number of the consumer reporting agency that furnished you with the report, the right for your tenant to snag a free copy of the report, and the consumer’s (tenant) right to dispute the accuracy and completeness of the report that you used to make a leasing decision. One other factor that you should keep in mind is the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that amended Section 615 of the FCRA to add a new requirement that a person (landlord) taking adverse action must also provide the consumer (tenant) with the numerical credit score used in the leasing decision.

Overall, there is a substantial body of law regulating consumer reporting and the FCRA is an integral component of keeping our private information secure. New services like VerticalRent (www.verticalrent.com) and AppSingular (www.appsingular.com) are changing the business model of tenant screening into a direct-to-consumer applicant initiated process. With about 32% of the American population renting, it’s about time that the consumer (tenant) has more control of their personal information with AppSingular. At the same time, however, landlords are also reaping the benefit of using advanced software like VerticalRent to manage their growing rental property empire.


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