'Sloppy' Background Checks Are Preventing Renters From Securing Housing

Renters in the U.S. are contending with more than just high prices, according to two recent government reports that found error-ridden background checks are disqualifying many would-be tenants.

The Consumer Financial Protection Bureau (CFPB) says that inaccurate consumer data stemming from “sloppy procedures” at private background check companies contributes to higher costs and barriers to rental housing. The bureau's conclusions are based on industry research, case law and more than 24,000 consumer complaints.

Nearly two-thirds of the complaints, filed between January 2019 and September 2022, claimed private background screening companies had reported false, misleading or outdated information to landlords, leading to tenancy rejections. The background reports are constructed by automated data collection and detail applicants' private information, like credit history, civil and criminal records. They also provide landlords with proprietary risk scores calculated by background check companies' own models.

The CFPB says most landlords, both big and small, now use these screenings to decide whether they will rent to a prospective tenant.

“When a company produces a tenant background check report that is riddled with errors, it can cause serious harm to a family seeking housing,” CFPB Director Rohit Chopra said in a news release.

Consequences of background reporting mistakes

Not only do renters suffer ramifications like application rejections, they also lose money on application fees and other unexpected costs resulting from false or inaccurate consumer reports.

According to the CFPB, 68% of renters are forced to pay for background screenings to apply for rental housing. Fees vary by location — cities like New York cap application fees at $20 per applicant — but they average $45 nationwide, according to the credit bureau Experian.

That may seem like chump change, but those fees can add up quickly because renters who become victims of background reporting errors often have to submit multiple applications without being told why they keep getting rejected. Many renters are unaware that they are entitled to a copy of their background report and do not find out about inaccuracies until after they lose housing opportunities.

Alongside losing application fees, renters can experience other financial consequences when they're unable to secure adequate long-term housing, such as having to spend un-budgeted dollars on emergency accommodations.

The CFPB reports also found that tenancy background checks may violate consumer protection laws by failing to promptly correct errors, like instances of false identity, which occur when criminal, arrest or eviction records belonging to someone else are included in an applicant's report. The Fair Credit Reporting Act (FCRA) guarantees consumers the right to have inaccurate reporting reviewed and corrected within 30 days of filing an initial objection with background screening providers, but some 4,500 complaints filed with the CFPB claimed companies failed to do so.

How can I fix mistakes in a tenancy background report?

The process of disputing mistakes on a background report is often frustrating and difficult to navigate. The first step you need to take if you suspect you have errors in your report is to request a copy and review the information.

Next, you have to call the screening company and submit a written dispute letter via certified mail identifying the incorrect information. Be sure to include any documentation that supports your claim, such as a copy of a government-issued ID or birth records.

You have the right to dispute any erroneous information you find, which the screening company has 30 days to investigate and correct under federal law. In the event that your claim is approved and the information is corrected within that window, you should ask the company to provide the revised report to anyone who received a copy, like the rental company or landlord that denied your application. (You have the right to ask the company to provide a revised report to anyone who received the report within the last two years.)

Unfortunately, in addition to the 30 days these companies have to process your claim, they also have 60 days before they have to provide corrected copies to the appropriate parties. That’s more than enough time to lose the apartment you were gunning for, not to mention suffer the unexpected stress, financial costs and other consequences of being unable to secure housing.

“Ultimately, the reporting of inaccurate negative information can contribute to difficulty finding affordable, quality housing, and result in people living farther from school or work, paying more in rent and fees, and undermining household financial stability,” the CFPB said in its news release.

Screening companies also frequently make mistakes during the dispute process that can get your claim denied, sending you back to square one. If a screening company fails to correct the mistakes you flagged within the 30-day timeline, your best option is to seek legal help and file complaints with watchdog groups like the CFPB.

There’s no overnight solution to the headaches the emerging automated reporting industry can cause renters. If you’re struggling to have your report corrected, you can report the screening company by visiting the CFPB’s website or by calling (855)-411-2372.

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