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What should you do if an applicant meets rental criteria but fails their consumer reports or background checks? Denying their rental application is a given. The question is, however, how should you notify the applicant?

Whether you accept or reject a tenant, increase their rent or deposit, require a cosigner, or take any other adverse action, you should communicate your decision in writing, orally, or electronically.

According to the Fair Credit Reporting Act (FCRA), landlords must comply with its requirements when obtaining consumer reports on potential tenants. As part of the FCRA, landlords must notify applicants if they take adverse action based on consumer reports.

A consumer report may not have been the primary reason for the decision, but it is still required to provide an adverse action notice. Oral adverse action notices are allowed, but written notices prove you are complying with the FCRA.

Notifying the applicant or tenant is mandatory, regardless of how much weight the report played in the decision.

Find out more about adverse action notices below.

What Is an Adverse Action in Tenant Screening?

An Adverse Action Notice is a letter issued by a landlord or property manager informing a potential tenant that their rental application has been denied or conditionally accepted. In most cases, the reason is based on a background check done using their consumer report.

The FCRA defines "adverse action" very broadly in Section 603: they include all business, credit, and employment actions that adversely affect consumers, as defined by the FCRA 15 U.S.C. 1681 et seq.: Section 603(k). An adverse action is any action a landlord takes against a renter or applicant.

To ensure fairness to all applicants, you should have a standard Adverse Action Notice. Consequently, you will ensure that every applicant receives all the information required by law. Check local and federal laws to ensure that the information on an Adverse Action Notice is accurate and up to date.

How to write an advance action notice and what items to include

When writing your advance action notice, there are several elements that should not be forgotten. For example:

  • Details of the owner/manager of the property
  • Property details
  • Notice date
  • Applicant's name, the reason for the adverse action, and if they have been denied or if additional conditions have been set for acceptance.
  • Details of the Consumer Reporting Agency that processed the report (TransUnion, Equifax, Experian, etc.)
  • Notification that the C.R.A. was not the final decision maker
  • A confirmation that a 60-day free credit report is available to the applicant
  • A statement that applicants have a right to dispute inaccurate information with the C.R.A.

Consumer reports would be credit reports, an eviction and criminal report prepared by a credit reporting agency like TransUnion, Equifax, or Experian, and a tenant screening that includes rental history and records.

How Does an Adverse Action Notice Work?

For employers to consider arrest and conviction records, the Equal Employment Opportunity Commission issued the Individualized Assessment guidance in 2012. The Department of Housing and Urban Development (H.U.D.) recently adopted a part of this assessment.

As a first step, landlords need to establish a written assessment policy, and considerations a landlord should make include the following:

  • Crime, offense, or behavior nature and severity
  • The period since the incident or sentencing

The guide helps individuals from demographics with higher incarceration rates find employment and housing without being automatically excluded.

Make sure your management company's policies, or your policies if you run an affordable housing complex, comply with federal regulations. Besides, it is common for reporting agencies to provide adverse action notices that comply with FCRA requirements.

Common Adverse Actions by Landlords

The make-or-break moment with a tenant screening checklist for landlords is a bad tenant history. Marketing a vacant unit requires a lot of time and effort, and finding a tenant who will be considerate, responsible, and reliable takes work.

The following are common adverse actions you can take as a landlord if a tenant meets your rental criteria but fails your background check based on their consumer report:

  • Reject the application
  • Require cosigners for the lease
  • Strengthen deposit requirements
  • Increase rent

Who Is Responsible for Sending an Advance Action Letter?

The FCRA (Fair Credit Reporting Act) and Fair housing laws require landlords to send a notice of adverse action for any rental rejection letter sent. Any conditionally approved application that requires additional consideration, such as an extra deposit, or a cosigner, also requires a notice of adverse action.

When you know a tenant doesn't meet your criteria, reject them immediately so they can continue looking for other rentals. It is essential to ensure that the screening process is fair and that all prospective tenants can go through it.

If you are wondering how a background check works, you must treat all tenants equally under Fair Housing Laws. The Fair Housing Act prohibits discrimination against tenants based on their gender, age, race, ethnicity, and other protected classes.

It's still okay to reject tenants for reasons other than protected classes, such as:

  • Their credit reports
  • Criminal history
  • References from other landlords
  • Income, etc.

If you reject a tenant, it's best to do so in writing so that you can prove your reasoning.

The last step in the application screening process is to provide a denial letter. You must, however, ensure that any adverse actions you take are legally justified. Once completed, you're responsible for giving an adverse action notice to applicants.

In Summary

Tenants can significantly influence your day-to-day property management experience and overall net investment return as a landlord. Therefore, it is essential to thoroughly screen potential tenants and select only those who will be good tenants.

Accepting and rejecting rental applications can be challenging, but with a rental application form generator, you'll be able to create a document that accounts for your state's laws. The key to a successful tenant-landlord relationship is having pride in your rental property and working to make it a fair housing opportunity for everyone who meets your criteria.


Start your Rental Application now

Helpful Resources:

Federal Trade Commission - Using Consumer Reports: What Landlords Need to Know

US Department of Housing and Urban Development - Home

US Department of Justice - The Fair Housing Act

What should you do if an applicant meets rental criteria but fails their consumer reports or background checks? Denying their rental application is a given. The question is, however, how should you notify the applicant?

Whether you accept or reject a tenant, increase their rent or deposit, require a cosigner, or take any other adverse action, you should communicate your decision in writing, orally, or electronically.

According to the Fair Credit Reporting Act (FCRA), landlords must comply with its requirements when obtaining consumer reports on potential tenants. As part of the FCRA, landlords must notify applicants if they take adverse action based on consumer reports.

A consumer report may not have been the primary reason for the decision, but it is still required to provide an adverse action notice. Oral adverse action notices are allowed, but written notices prove you are complying with the FCRA.

Notifying the applicant or tenant is mandatory, regardless of how much weight the report played in the decision.

Find out more about adverse action notices below.

What Is an Adverse Action in Tenant Screening?

An Adverse Action Notice is a letter issued by a landlord or property manager informing a potential tenant that their rental application has been denied or conditionally accepted. In most cases, the reason is based on a background check done using their consumer report.

The FCRA defines "adverse action" very broadly in Section 603: they include all business, credit, and employment actions that adversely affect consumers, as defined by the FCRA 15 U.S.C. 1681 et seq.: Section 603(k). An adverse action is any action a landlord takes against a renter or applicant.

To ensure fairness to all applicants, you should have a standard Adverse Action Notice. Consequently, you will ensure that every applicant receives all the information required by law. Check local and federal laws to ensure that the information on an Adverse Action Notice is accurate and up to date.

How to write an advance action notice and what items to include

When writing your advance action notice, there are several elements that should not be forgotten. For example:

  • Details of the owner/manager of the property
  • Property details
  • Notice date
  • Applicant's name, the reason for the adverse action, and if they have been denied or if additional conditions have been set for acceptance.
  • Details of the Consumer Reporting Agency that processed the report (TransUnion, Equifax, Experian, etc.)
  • Notification that the C.R.A. was not the final decision maker
  • A confirmation that a 60-day free credit report is available to the applicant
  • A statement that applicants have a right to dispute inaccurate information with the C.R.A.

Consumer reports would be credit reports, an eviction and criminal report prepared by a credit reporting agency like TransUnion, Equifax, or Experian, and a tenant screening that includes rental history and records.

How Does an Adverse Action Notice Work?

For employers to consider arrest and conviction records, the Equal Employment Opportunity Commission issued the Individualized Assessment guidance in 2012. The Department of Housing and Urban Development (H.U.D.) recently adopted a part of this assessment.

As a first step, landlords need to establish a written assessment policy, and considerations a landlord should make include the following:

  • Crime, offense, or behavior nature and severity
  • The period since the incident or sentencing

The guide helps individuals from demographics with higher incarceration rates find employment and housing without being automatically excluded.

Make sure your management company's policies, or your policies if you run an affordable housing complex, comply with federal regulations. Besides, it is common for reporting agencies to provide adverse action notices that comply with FCRA requirements.

Common Adverse Actions by Landlords

The make-or-break moment with a tenant screening checklist for landlords is a bad tenant history. Marketing a vacant unit requires a lot of time and effort, and finding a tenant who will be considerate, responsible, and reliable takes work.

The following are common adverse actions you can take as a landlord if a tenant meets your rental criteria but fails your background check based on their consumer report:

  • Reject the application
  • Require cosigners for the lease
  • Strengthen deposit requirements
  • Increase rent

Who Is Responsible for Sending an Advance Action Letter?

The FCRA (Fair Credit Reporting Act) and Fair housing laws require landlords to send a notice of adverse action for any rental rejection letter sent. Any conditionally approved application that requires additional consideration, such as an extra deposit, or a cosigner, also requires a notice of adverse action.

When you know a tenant doesn't meet your criteria, reject them immediately so they can continue looking for other rentals. It is essential to ensure that the screening process is fair and that all prospective tenants can go through it.

If you are wondering how a background check works, you must treat all tenants equally under Fair Housing Laws. The Fair Housing Act prohibits discrimination against tenants based on their gender, age, race, ethnicity, and other protected classes.

It's still okay to reject tenants for reasons other than protected classes, such as:

  • Their credit reports
  • Criminal history
  • References from other landlords
  • Income, etc.

If you reject a tenant, it's best to do so in writing so that you can prove your reasoning.

The last step in the application screening process is to provide a denial letter. You must, however, ensure that any adverse actions you take are legally justified. Once completed, you're responsible for giving an adverse action notice to applicants.

In Summary

Tenants can significantly influence your day-to-day property management experience and overall net investment return as a landlord. Therefore, it is essential to thoroughly screen potential tenants and select only those who will be good tenants.

Accepting and rejecting rental applications can be challenging, but with a rental application form generator, you'll be able to create a document that accounts for your state's laws. The key to a successful tenant-landlord relationship is having pride in your rental property and working to make it a fair housing opportunity for everyone who meets your criteria.


Start your Rental Application now

Helpful Resources:

Federal Trade Commission - Using Consumer Reports: What Landlords Need to Know

US Department of Housing and Urban Development - Home

US Department of Justice - The Fair Housing Act