Tenant Screening Tips: The Adverse Action Notice

by Chris on July 27, 2020

When the information in a credit, eviction, criminal history, or other investigative report provided by a tenant screening agency negatively impacts the landlord’s decision regarding an applicant, that applicant is entitled to notification. This is referred to as an Adverse Action Notice.

Examples of impacts that require notice include:
Rejection of the applicant;
Requiring a co-signer; or
Increasing the rent or deposit.

If any such actions are taken, the applicant is entitled to receive notice that outlines their rights, including:

The contact info for the consumer reporting company that supplied the report;
A statement that the company that supplied the report did not make the decision to take the unfavorable action and cannot provide specific reasons for it; and,
Notice of the person’s right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get a free report from the company if the person asks for it within 60 days.

The purpose of the notice is to give the applicant a heads-up that something negative appears on their records, and to provide them the opportunity to correct information that they feel is inaccurate.

This notice can be provided electronically, in writing, or verbally. However, a written record is suggested to prove compliance with this law.

The Adverse Action Notice is required in any case where the consumer report¬† like credit, eviction,¬† and criminal history influenced the landlord’s decision in any way. The information need only be one factor the landlord considered. So, if the landlord runs a credit report that is bad and also determines the applicant’s income is inadequate and subsequently rejects the application, the landlord will need to provide an Adverse Action Notice.

This notice requirement is a small price to pay for information that helps a landlord prevent income loss from an underqualified or problem tenant. Many landlords and property managers create a fillable template for the Adverse Action Notice which streamlines the process.

Because this rule applies in cases where the landlord accesses consumer data, the best way to avoid this requirement is to verify the information in the rental application first, before ordering tenant screening reports. That eliminates prospective tenants who don’t qualify for basic reasons like insufficient income or bad rental history — applicants who would be rejected with or without the reports.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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