Tenant screening and Fair Housing regulations

ImageThe other day I have another lively discussion with a fellow on my LinkedIn property management group. I think that the key takeaway is that landlord should not be afraid of carefully screening a tenant as long as the screening focuses on a tenant’s ability to pay.

Property Manager #1:

“These software options probably do not have the ability to complete a process of elimination thus the possibility of getting the wrong results is very very real! In addition a credit score does not tell the whole story and on its own should not be depended on. To truly know the applicants ability to pay the rent, a screening of county and circuit records in ever county the applicant has lived for at least the past 5 years must be completed. Last but not least these companies are not FCRA compliant. The FCRA is a federal law designed to improve the quality and accuracy of background screening while protecting the civil rights of all parties. Again..why rely on software when you could have a professional to screen?”

Me:

“Sandy, what makes you think the other services are not FCRA compliant? Please back it up. Let’s take Tenantify for example. It replicates how a typical landlord conducts employment and income verification, but do three things better: 1. It uses a bank API to directly pull bank statement from tenant bank (with tenant permission of course) to prevent fraud, 2) It verifies an employer phone number before calling the employer, 3) It has a team of specialists to spot forged documents while processing paper bank statement / paystub. I do not see FCRA compliance issues here.”

Property Manager #2:

“No offense, but I looked at your sample reports and the spelling errors are glaring. I think your #2 is fairly inexact as the majority of employers will not give any information, at least without a signed and sometimes even notarized release. We dropped doing verifications 2 decades ago for that reason, and 15 bucks and then you add in the normal checking, and your up to 40-50 per screening.”

“As long as you understand that the tenant is a student with a month income of $700 from parents, you are probably fine accepting the tenant. Students do not have regular work-related income, but their income from parents is just as stable. I think the key question is that whether the $700 will be enough to cover your rent, or the tenant needs to find another source of income to cover rent payment.”

“From your sample files, so you make recommendations? And how much is your E&O costing you? Is also a little bit of Fair Housing issues in there as well.”

Me:

“Thanks for these great questions. Since you specialize in compliance (based on your LinkedIn profile), let me state our point of view in tenant verification. Please correct us if you see any errors. We are willing to change our practices if the current practices have Fair Housing issues.”

“We believe that Fair Housing regulations prohibit discrimination based on race, color, religion, sex, national origin, and family status. We agree with the regulations 100%. What Tenantify tries to verify is a tenant’s ability to pay rent, and nothing else. In the fictional case you cited, we verify that the tenant has $700 in monthly net income, and ask the landlord to assess whether the verified income is sufficient to cover the rent; if not, the landlord should verify other sources of income. We do NOT recommend accepting the tenant if $700 is the only source of verifiable income and it is not sufficient to cover rent.”

 

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