Most landlords will pull a credit report on an applicant and use the information contained in the report as part of their basis in accepting or rejecting the applicant. If you reject an applicant based on information contained in their credit report then you are obligated to providing a notice for the rejection because of federal law called the Fair Credit Reporting Act (FCRA). This notice is called an “adverse action notice.”

The notice that you provide must contain certain information as outlined in the FCRA. The notice must include the name of the consumer reporting agency that provided the credit report you used in making your decision on the applicant. In addition you must provide information on the consumer’s rights under the FCRA. These rights include the ability for them to obtain a copy of the report within a specified time frame.

Even if the credit report was not the major reason for rejecting an applicant, you must still provide a notice if the report was used in any way in your decision. Even it was a small part of the consideration for rejection; you must still provide notice to the applicant.

Landlords who fail to provide notice can face legal consequences which can include fines and possibly jail time. Applicants can sue landlords in federal court for damages for failure to provide notice. If an applicant is successful in litigation against a landlord, they are entitled to recover not only damages awarded by the court but also court costs and reasonable legal fees. Applicants can also sue for punitive damages if they can show the landlord deliberately violated the FCRA.

Don’t risk being sued in court for violation of the FCRA when evaluating applicants who want to rent your property.

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Filed under: Landlord Tip • Landlording • Property Management • Real Estate Investing

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