Fighting the Tenant Blacklist

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August 16, 2016; New York Times

Landlords, even mission-driven “affordable housing” providers, are increasingly using civil court records to screen thousands of applicants who are swelling their waiting lists for the scarce affordable units. Third-party tenant screening services have become a big business in the years since the Internet made public records accessible with the stroke of a key. Data brokers have emerged to find public records and link them—often by name, sometimes by social security number—into a profile, which they can sell to a tenant screening service that retails the information to landlords for a fee.

The problem is complicated by the fact that public records, especially civil court cases, are notoriously inaccurate and out-of-date. For example, a tenant may have agreed to a “hallway settlement” to pay off an arrearage only to find the landlord proceeded with the eviction anyhow. In other cases, evictions are dismissed because of faulty notices, retaliation, or the landlord’s inability to show the tenant was in default. Typically, none of these favorable outcomes show up in a public record…just that an eviction was filed.

Under the Fair Credit Reporting Act, tenants have the right to appeal a denial based on “credit,” which can be broadly interpreted to mean any info that appears on a “credit report,” including civil filings. But, prospective tenants often don’t know where to turn or find it difficult to get legal assistance. Reporters Kim Barker and Jessica Silver-Greenburg describe efforts by NYC Councilman Benjamin J. Kallos to expand the information that the court provides about eviction cases. His proposed ordinance would “force screening companies to provide more complete descriptions of housing court cases, including records that show when tenants won, or when an apartment was decrepit.”

The Federal Trade Commission (FTC) has issued a series of reports on the work of data brokers, including a large study of abuses and recommended reforms. A couple of bills have been introduced only to be stalled to death in the deadlocked and do-nothing Congress. Issues raised by the FTC and congressional advocates include providing a simple means of correcting errors, adding mitigating information to reports, and even gaining free access to one’s own reports.

Even so, the tenant screening industry continues to outstrip the regulators. A recent Washington Post article explains about how data brokers are “scraping” social media to gather information based on records that are not public.

Owners of HUD-assisted properties are permitted to create a tenant selection plan that outlines their standards for prospective tenants. As long as the guidelines don’t directly discriminate against members of a protected class or get found to be “unreasonable,” landlords have a great deal of flexibility in what preferences they permit or what barriers they erect.

Sometimes, HUD will issue “guidance” that suggests but does not require owner compliance. An example is the recent memo on “one strike” denial based on criminal background. In the “guidance,” HUD suggested that someone might challenge these knee-jerk denials as discrimination based on a “disparate impact” on a protected class. The hitch is, “someone” needs to find a fair housing organization or attorney to research the case, construct a claim, and then file an administrative complaint or lawsuit. Ask the plaintiffs in the fair housing cases filed against Sandcastle Apartments in New York City how “guidance” is working for them.

HUD’s “guidance” approach is, in part, a style of management made popular by Cass Sunstein, an early Obama supporter, who coined the term “nudge” to describe policies based on suggestion or encouragement of desired behaviors paired with implicit threats of bad consequences for noncompliance. Unable to get Congress to act to protect civil rights of emerging “protected classes,” and in an attempt to avoid charges of administrative overreach, the Obama administration is increasingly turning to guidance or policy by suggestion. (An example currently in the news is the transgender bathroom issue. When the Department of Education issued a guidance suggesting that local school districts could be in violation of the Fair Housing Act by requiring transgender students to use the bathroom based their birth certificates, the attempt at providing “guidance” was lost in the politics of emotion, resulting in litigation.)

Until Congress gets around to consumer protections, tenants have five ways to address misuse of tenant screening information.

  1. Check your credit report. Consumers are entitled to get a free copy of their reports once a year from each of the credit bureaus. If there are red flags, tenants can prepare offsetting info before making applications.
  2. Tenants need to think twice about posting info on social media and ask friends and family to remove potentially damaging pictures, tags, and posts.
  3. In case of a denial, tenants can demand to be provided with the criteria for tenant selection, the information used to deny your application and the source of that information. Just asking for the information could trigger a favorable reconsideration. If denied information or reconsideration, a tenant could file a complaint with the FTC and the state attorney general.
  4. Supply the prospective landlord with supplementary information about one’s rental history in order to offset a bad report. Landlords don’t want empty units and will often consider factual information about an applicant. Explaining or rebutting claims in a tenant screening report can make a difference.
  5. If a tenant believes that the denial is really a smoke screen for illegal discrimination based on race, color, religion, national origin, gender, familial status or disability, contact a private fair housing agency.

—Spencer Wells