Equifax just won the honor of being the most complained about financial company from 2017. This shouldn’t come as a surprise to any of us: the company’s gigantic breach last year is having lasting impacts. And those impacts aren’t limited to the vulnerability of our personal data.
In fact, this fiasco is one of the main drivers behind an issue that is significantly affecting property managers and landlords. Stricter regulations by the credit bureaus make it more difficult for landlords to get instant credit report data for resident screening purposes.
Property managers and landlords rely on credit report data provided by the major credit bureaus: TransUnion, Experian and Equifax. However, since the recent security breaches on consumer credit information, the credit reporting agencies are tightening access for resident screening purposes.
Prior to this year, landlords had two options for obtaining permission from the credit bureaus to directly order and review tenant credit information on rental applicants.
Option 1 – Condensed Credit Report (sometimes referred to as a Credit Report Card)
Option 2 – Full Credit Report
Landlords gain access to resident credit data by completing a credit access application with their tenant screening agency. The credit report card option contained fewer details on the renter, and thus the application process was easier and faster for landlords. In the past, this method did not require a site inspection as required by the FTC. Only pulling a full credit report required the site inspection step. This is no longer the case.
New regulations now stipulate that all landlords and property managers must now complete a site inspection for any type of credit report, including a credit report card. If you’ve never had to do this before, a site inspection means that a licensed inspector visits your office (or home office) in person to make sure it is secure. Basically, they are checking to make sure that the public doesn’t have access to sensitive consumer data, which is a provision of the federal Fair Credit Reporting act.
If these tightened regulations mean that it will be the first time you’ve had to schedule a site inspection, here are some basics you’ll need to know. First, you’ll need to find a tenant screening service. This can be as simple as doing a Google search (make sure to check reviews!) for “tenant screening report” or similar. After you find a service you are comfortable with, the site inspection is part of the process.
Your resident screening agency will set you up with a third-party licensed inspector that is approved by the major credit bureaus. The inspection should take less than 30 minutes to complete during which they will be verifying:
- That you are a property manager or rental property owner and that the documentation you provided is accurate and legitimate;
- That you will be using the credit reports for the sole purpose of tenant screening only; and
- That consumer credit files will be pulled from a safe and secure location as well as stored and disposed of properly (lock on the door, password protected computer, locking file cabinet, shredder, etc.).
So, all in all, the process is fairly simple and easy, but it is good to plan ahead and be aware of the steps you need to take in light of this new regulation – before you have a vacancy and need to pull credit on potential tenants.
Still don’t want to complete a site inspection?
While the site inspection can be relatively simple, some housing providers might seek an alternative to reviewing resident credit information.
Landlords and property managers do have the option of asking the renter to order a credit report on themselves, which they then give the landlord or manager access to view, usually through a secure email notification.
These types of tenant-initiated credit reporting services are secure and provide reliable credit report information. The drawback to this system, however, is waiting for the tenant to do the work. If the potential renter isn’t motivated to immediately order a credit report on themselves and give you access, your tenant screening process can be delayed and it will take longer to get the property leased and generating income.
In a real estate landscape that is facing more and more regulatory measures, the Equifax breach and subsequent push for greater protection of consumer data is just one piece of the puzzle. Equifax’s battle continues as the company is being looked at by the Consumer Financial Protection Bureau and the Federal Trade Commission and others in all 50 states. As property managers, this disaster could continue to tighten regulations surrounding use of consumer data alongside other issues like rent control, property inspections and more.
Kaycee Wegener shares knowledge about industry news, products and trends within the property management and real estate community. Learn more about Kaycee at www.rentecdirect.com and on Twitter at @thatrentergirl.