Renters struggling to find a home in the tightest metro Phoenix rental market in nearly 50 years are submitting to new forms of background screening that include facial recognition, cryptic computer algorithms and monthly tracking, allowing landlords to find out much more about tenants than some may realize.
Hundreds, and potentially thousands, of companies have popped up in recent yearsto collect personal information on Americans to recommend whether landlords should accept applicants, charge higher fees and renew leases.
One firm, First Advantage, boasts of saving landlords millions of dollars a year by identifying thousands of applicants to deny, even as consumer advocates raise concerns about potentially inaccurate data and biased algorithms.
The background checks don’t just look for credit reports, evictions and criminal convictions, according to these companies’ websites.
In some cases, artificial intelligence programs ingest millions of tenant data points to identify “problem renters” and predict future “willingness to pay” and likelihood of moving.
The screening reports may include Netflix payment histories, billing records from rent-to-own furniture stores, student loans, utility payments, lease disputes and even facial scans.
They may require a prospective tenant to connect an app to their bank account to extract a raft of financial data such as paycheck deposits, savings and checking account balances and side income.
They may continue tracking renters after they’ve moved in and send landlords reports on their behavior every 30 days.
“Tenant screening reports play a real role in tenants’ ability to secure stable housing. They can impact consumers in terms of financial costs, fewer rental housing options and time,” said Sophie Sahaf of the U.S. Consumer Financial Protection Bureau. “(The result can be) they’re getting substandard housing, they’re in a ZIP code they don’t want to be in, even homelessness.”
Inaccuracies can hurt tenants
Renters have complained to the federal agency that their tenant applications have been rejected because of inaccuracies in screening reports, Sahaf said.
Problems in the reports include information that belongs to a different consumer, outdated evictions or criminal charges, an eviction showing up as multiple evictions or an inaccuracy corrected by one background check company that has not been corrected by another, she said.
One study found that 22% of eviction records in 12 states contained ambiguous information about how the case was resolved or falsely represented a tenant’s eviction history.
Sometimes, it’s impossible for tenants to understand why an application has been rejected because the screening company is not transparent about the factors that go into its auto-generated risk score, Sahaf said.
“There’s a little bit of a black box for some of what exactly goes into those scores,” Sahaf said.
By law, property owners are required to notify tenants if they have relied on a background report for a negative decision, such as denying a lease or charging a steeper security deposit.
Property owners must tell the tenant that they have a right to a free copy of the report within 60 days, they have a right to dispute inaccurate information and the name, address and phone number of the company that provided the report, according to the CFPB.
But without an “adverse action” notice from landlords, it’s impossible for a tenant to know how many screening companies may have inaccurate information about them.
And if a landlord fails to send a notification, it depends on the tenant or another whistleblower to know the law and file a complaint with the CFPB to cause enforcement, the agency said.
“Everything that curtails a tenant’s ability to (rent) hurts them, including inaccuracies that can appear in these reports,” she said. “Of course that’s all going to be exacerbated by the current crisis we’re in.”
Why landlords use screening companies
Background reports are essential for landlords to protect properties from potentially unscrupulous tenants as financial risk in the rental industry has increased, Arizona Multihousing Association CEO Courtney Gilstrap LeVinus said.
Landlords in some cases went 18 months without payments from renters during the pandemic because of government eviction moratoriums and slow rental aid, she said.
Almost a third of property owners surveyed by the National Rental Home Council have tightened standards when evaluating rental applications and nearly a quarter said they had to sell off properties in the wake of the pandemic.
“Against this backdrop of added risk, many property owners have become more cautious than ever – because not getting paid is a looming possibility,” LeVinus said. “Given that virtually all rental owners have loans or mortgages to pay and also have an enormous investment at stake, they use such information (in screening reports) to protect themselves and to protect the other residents of their communities.”
Background reports also ensure tenants are treated equally, she said. Federal housing law requires landlords to apply the same application standards to all tenants and not give anyone special consideration.
“That’s a big part of the reason the industry uses screening tools with objective standards,” LeVinus said.
If a rental applicant has a blemish on their record, they should share as much information with the property owner as possible, she said.
“For example, if the renter was temporarily unemployed or underemployed during COVID, we recommend disclosing that information up front. Also if the renter received rental assistance, it can be helpful to work with the previous rental owner to vacate the judgement and clean up their credit history,” she said. “Thousands of rental owners across the state have gone above and beyond to assist renters during these trying times, and they will surely continue to do so without recognition.”
If a renter believes a background report is inaccurate, they should say something, LeVinus added.
“If it is clear that the renter is correct, our experience is that rental owners would reconsider and take a second look,” she said.
Some renters struggle to find housing because of evictions
Two Valley renters with past evictions said finding a place to move has been next to impossible once property managers look up their backgrounds.
Shela West, 60, was rejected from seven locations as the lease for her cramped one-bedroom apartment was ending. The $50 fees per application added an extra financial burden, she said.
“Thank God my boyfriend has food stamps, or we would starve,” West said.
She believes a 2018 eviction from when she was struggling after her husband died has stymied her.
“I hope and pray that they would look at people’s backgrounds and ask questions to those that had a misfortune in their life,” West said. “It’s pitiful. They don’t give you no explanation.”
She finally was able to move into a different apartment in the same complex after begging the landlord to keep her, she said.
John Sears, 70, who works in health care, has three evictions on his record.
The most recent was in 2021, when he says he got COVID-19, was out of work and couldn’t make his rent. He says the landlord evicted him, despite the moratorium, based on lease violations he denies committing.
Sears found a room in a crowded home with others in similar situations, but the lease would be up soon, he said.
“I’m in the quandary now of what am I going to do?” Sears asked, calling the evictions “a big scarlet ‘E.’ “
Screening companies boast of millions of personal data points
The Republic reviewed background reports provided by two Republic employees from RP On-Site LLC and Investigative Screening Company.
The latter company, based in Mesa, misspelled its own name on the report.
One tenant said the facial scan required for one of the background checks was unsettling.
The other tenant said filling out the paperwork took significant time. He had to look for addresses up to a decade prior and worried about making an error.
Both reports included risk scores generated by computer algorithms.
The newspaper contacted 10 renter screening companies for comment:
- Contemporary Information Corp. (CIC)
- Experian RentBureau
- First Advantage Corporation Resident Solutions
- Real Page, Inc. (LeasingDesk)
- SafeRent Solutions, LLC
- Screening Reports, Inc.
- TransUnion SmartMove
Only one company responded.
Experian RentBureau said it does not provide reports directly to landlords but feeds information to companies that do.
Experian RentBureau collects positive and negative information about renters such as rental payment history, terms of lease, payment obligations and late payments. Consumers can improve their credit rating by using a tool called Experian Boost to volunteer data on timely payments for rent, phones, utilities or video streaming subscriptions.
But the other companies boast about their massive pools of data on their websites.
Contemporary Information Corp. says it has more than 36 million eviction records and 1 billion criminal records.
“With objective, reliable background screening data, you can unveil major and minor red flags you wouldn’t have originally caught,” the company says. “CIC will help you find a healthy, legal balance between helping applicants find a home while mitigating risks.”
First Advantage says it collects payment histories, lease disputes and other issues on at least 1 million rental units, while incorporating millions of other records on collections, criminal history and other information.
Its database “augments a typical resident background check by helping you to identify problem residents who otherwise might not be found through traditional background screening searches.”
First Advantage also uses facial recognition to match applicant selfies with their driver’s licenses and gains access to applicants’ banking institutions to verify financial information.
The company says it has “identified tens of thousands of records of unqualified applicants,” saving landlords “approximately $6 million” in one year, presumably a projection of possible missed rent payments.
Its “Resident Watch” program sends landlords updates every 30 days on whether a tenant has a new criminal record and predicts whether a tenant is likely not to renew a lease, the company says.
RealPage Inc. uses artificial intelligence gleaned from 30 million leasing records from more than 20,000 rental communities to predict not just a renter’s “ability to pay” but their “willingness to pay.”
“This innovative solution leverages the power of AI and machine learning to precisely analyze your applicant pool, which delivers a stronger predictor of future performance and renter behaviors,” the company says.
SafeRent Solutions says its “predictive scoring model” can answer the question about rental applicants: “Are their intentions good?”
“One score takes the guesswork out of the decision to lease,” the company says.
Consumer watchdog agency steps up scrutiny
Background and credit checks should be expected, LeVinus said.
“Banks, car dealerships, credit card companies, insurance companies, retail stores, prospective employers and hundreds of other businesses use background and or credit checks to assess risks and strengths,” she said. “Rental property owners are no different.”
But CFPB took the strong step in July of warning landlords and tenant screening companies that inaccurate reports can “be the difference between homelessness or settling into a safe and affordable home.”
The agency said it would step up scrutiny as the federal eviction moratorium came to an end.
“Errors in your tenant screening report shouldn’t hold you back from having a place to call home,” CFPB Acting Director Dave Uejio said in a media release. “Landlords and consumer reporting agencies have clear obligations under federal law, regarding the accuracy of information reported about tenants, and to conduct timely investigations when consumers dispute information. They need to get this right. The CFPB will closely monitor their compliance, and we will use all the tools at our disposal including enforcement, to protect consumers during this critical time.”
Consumer reporter Rebekah L. Sanders investigates issues of fraud and abuse involving businesses, health care and government agencies. Contact her at [email protected] or follow her on Twitter at @RebekahLSanders.
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