Incidents of inaccurate, outdated and misleading information in tenant background reports are on the rise, according to a pair of reports from the Consumer Financial Protection Bureau.
The CFPB analyzed publicly available data on 17 tenant background check companies in one report and roughly 26,700 consumer complaints in the other. The two reports were released Tuesday morning.
The agency found that background check companies have prioritized speed and ease of use for landlords — particularly real estate investment trusts, private equity firms and other corporations that more than tripled their share of the rental housing market between 2001 and 2018 — over accuracy and service to prospective tenants.
Collectively, these issues are making it harder for renters to secure homes at a time when housing availability is already limited and becoming increasingly expensive, the reports found.
"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 written statement. "These background reports are heavily used by corporate landlords that own an increasing share of rental housing in our country, so we are taking steps to ensure these reports do not contain false information."
The CFPB did not mention any legal action or regulatory reform in its reports, but it said it would keep a close eye on the tenant background reporting industry. The agency also promised to work closely with the Federal Trade Commission to hold bad actors in the space accountable.
"FTC enforcement investigations have identified serious problems with tenant background check reports," Samuel Levine, Director of the FTC's Bureau of Consumer Protection, said in a written statement. "We will continue to work with the CFPB to ensure that firms compiling these reports are following the law."
Between January 2019 and September 2022, the average volume of complaints filed with the CFPB about tenant background checks increased from 300 a month to nearly 700 a month. The vast majority of complaints were about the inclusion of inaccurate information, ranging from outdated information that should be omitted by law to inaccurate criminal and eviction records.
One of the most common errors in tenant background reports is the inclusion of negative information that belongs to someone else with the same name, one report found, the result of screening companies using name-only matching, rather than including Social Security numbers and other identifying information. This issue tends to be more common among Hispanic, Asian and Black communities than their white counterparts.
The CFPB found that many prospective renters had a hard time accessing their background reports, despite the fact that their application fees typically cover the costs associated with completing the screening. Many companies do not share adverse action notices with tenants, the CFPB noted, which is illegal.
When tenants do find issues in their reports, it is often unclear how they can report those issues, the CFPB reports note, and requests for changes frequently are ignored.
The report also noted that relevant information, such as prior rent payment, is often left out of tenant background reports. Only about 2% of renters have their rent histories factored into their applications, the CFPB's market analysis found.
The CFPB reports came one day after the White House hosted a meeting on tenant protections that included top policymakers such as Domestic Policy Advisor Susan Rice, National Economic Council Director Brian Deese, and American Rescue Plan Coordinator Gene Sperling as well as more than 70 housing and tenants' rights advocates.
Biden administration officials pledged to enforce the Fair Housing Act to prevent discrimination in tenant screening and to ensure due process in instances of evictions and other tenant-landlord disputes, according to a readout of the meeting. They also reiterated the president's policy priority of increasing the supply of for-sale and for-rent homes nationally.
