Changes in FCRA, TransUnion policies create screening problems for small landlords (like me)


I just received an email today from Landlord2Landlord, my screening agency, saying that TransUnion had changed its requirements, which creates big problems for me. Previously, of the three main credit reporting agencies (TransUnion, Experian, and Equifax), only TransUnion allowed small landlords to pull credit reports on potential tenants without having an “on-site inspection” of their property management office — to ensure that credit reports were dealt with in a professional and confidential manner, kept locked up securely, etc. In the case of a small landlord whose “office” was in his or her residence, Experian and Equifax required an inspection to ensure that the “property management office” was separate from the living area of the residence, and that it was “secure”.

In my case, I manage exactly one rental unit, which is above me — the upper unit of the duplex that I own and also live in. I can’t really see devoting an entire (locked) room of my living area to managing that one apartment, and storing the credit reports that I pull once every year or two. TransUnion, up until now, understood that there were exceptions like this, and allowed me to pull credit reports through my screening agency. But, unfortunately, they’ve now reversed their policy (due to changes in the FCRA –Federal Fair Credit Act) and are also now requiring inspections — inspections that will cost me $100 (on top of the $45 fee I paid to join Landlord2Landlord, and the $15 or so that I pay for each credit report that I pull). That, and I really have my doubts that the inspector would even pass me, since I don’t have a separate office area dedicated to my property management duties…

From the document I received:

“For the past few years we have been able to offer our members access to TransUnion credit reports without an on site inspection of your commercial or residential office facility.

TransUnion has reversed their policy and it is now mandatory that we perform an on site inspection for anyone accessing TransUnion credit information. The deadline is January 1, 2007. This inspection will be used to verify your commercial business location or if you work from a residence that your office is separate from your living facility, and that it is secure.

In order to comply with the bureaus requirement, we must have your business or home office inspected by January 1st, 2007 or we will be forced to discontinue your access to credit information from your L2L account. If your inspection has already been completed please note when this was done on Exhibit B. No further charges will be due if you already paid for an on site inspection.

Your cost for the on site inspection and monthly reporting compliance is: $99.50. This fee is non refundable and does not guarantee acceptance or approval. Approval is determined by the End User and your office security. The inspection is only mandatory for credit access. If you elect to keep your Landlord2Landlord account open without credit access, you can still use our criminal, eviction, and courthouse records. Credit bureau reporting will still be allowed. Bad debt collections will also be allowed.”

What, do I need to buy a lock for my one filing box that I keep most of my duplex paperwork in? Can I just show them my paper shredder? Can I buy one of those tiny safes? I mean, seriously, I deal with my property management duties in a more professional manner than most landlords I’ve ever rented from. I don’t leave credit reports “lying around” when I have parties, I don’t toss them out in the yard to blow all over the neighborhood… I pull them up, evaluate them, and then place them in the file that I establish for each tenant. If the credit bureaus want me to shred them, or put them in a safe, I’ll do that, but I’m certainly not building an addition to my home for the sake of pulling credit reports for my one rental unit…

To top it all off, today is November 9th. Landlord2Landlord tells me that I need to have an inspection completed by January 1st in order to be able to continue using my account. Not much time, and it sounds like these inspections may even be difficult to come by:

“Please do not delay. Several screening companies have elected to go out of business rather than comply with these new regulations. Our membership request is soaring as are many other companies. There are only a few companies in the U.S. that are approved to perform these on site inspections on behalf of the credit bureaus. Tenant, employment, and mortgage screening companies are scrambling to have hundreds of thousands of request for inspections done by January 1, 2007. Landlord2Landlord alone has thousands of inspections to order which will place a tremendous administration burden on our staff.

The longer you wait to order your inspection the longer it can take to complete. Once we pass January 1st and the on site has not been done we will be forced to disconnect your credit link until the inspection has been done, no exceptions.

The bureaus are so concerned that landlords keep their computers, credit reports and passwords secured, that they have placed a monthly reporting requirement on all screening companies, that requires us to report to them each month all the companies and members names that operate from a residential location.”

To their (partial) credit, I’m being given such short notice for this change because Landlord2Landlord apparently thought that they had a deal going with TransUnion, in which they could just give small landlords a summarized version of the credit report, kind of a pass-fail thing; one that wouldn’t be quite so sensitive (and apparently OK to leave lying around on a kitchen table, which I guess is the big fear in all of this) — but apparently this deal fell through at the last minute.

“Completion by “January 1st, 2007” is mandatory. Otherwise your credit information account will be deactivated. We apologize for such a short notice. We felt that we possibly had a “work around” scenario with the credit bureaus whereas we could deliver a summary credit report, thereby eliminating the on-site inspection requirement. This may still happen but there is no guarantee and we are still not sure how much programming we would have to do to make summary reports available. This process may take another year to implement and may have additional cost passed on to the End User in order to access.”

So maybe they can continue to get me credit reports, maybe not, don’t cross my fingers, and expect to pay more for it.

POSSIBLE SOLUTIONS
Being the optimist in this situation, there are a few things I can do:

  1. Ask that tenants furnish their own credit reports with their rental applications — they can pull those for free now, after all. However, it would be really easy for a potential tenant to falsify the information on one of these; all they’d need is a computer or a copy machine
  2. Find another screening agency that pulls credit reports on potential tenants, reviews that information, and provides me with a “pass-fail” analysis. The cons of this, of course, are that I don’t get to make the judgement calls in this situation; if their credit’s bad I don’t know how bad it actually is, if it was once bad and now is getting better, if it’s unpaid student loans or missed mortgage payments that are making it bad (which are worlds away from each other, in my eyes), etc. Also, I can imagine that this kind of service would be a bit pricier than the $12-15 that I currently pay per credit report.
  3. Hire a property manager. Which seems ridiculous given that I have a total of ONE rental unit, and I live below it. I can’t imagine it being cost effective, and again I’d be giving up a good deal of control.
  4. Possibly team up with another property manager who has an officially sanctioned “office,” to do my official tenant screening work?
  5. File a class-action lawsuit against TransUnion?
  6. Buy a small safe, schedule an inspection, and hope for the best?

My current tenants are in a lease until next June, and I’m hoping that they stay on as month-to-month tenants after that, so theoretically I shouldn’t have to deal with this for a while… but I’d like to have a solution figured out before the time comes to screen tenants again.

If you’re reading this, and are in a similar situation as me, I’d love to hear what your work-around plans are. (Or if you know of a better screening agency who is working around TransUnion’s new policies in a better way.)


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4 thoughts on “Changes in FCRA, TransUnion policies create screening problems for small landlords (like me)

  1. wow, now this is interesting…i am myself a landlord with a tenant in a house and am facing the same problem…to screen them i used lexis-nexis but that can get expensive if you screen a lot of people…yikes maybe someone should write to a congressman!

  2. Landlord2Landlord is still retaining its smaller landlords because we also have other services(collections, skip tracing, tenant report card, etc.) other than credit info. Using a service like ours helps you protect your assets better.
    However, we at Landlord2Landlord are not happy with the amount of effort required to keep up with the increased regulations imposed on us by the greater powers.

  3. I HOPE THIS HELPS A BIT, I DO INSPECTIONS FOR A LIVING AT IT SEEMS YOU ARE WORRYING ABOUT NOTHING. THE INSPECTIONS ARE MANDATED AND NOT BY TRANSUNION, SO WHICHEVER COMPANY YOU SHOULD CHOSE HAS THE SAME MANDATES. THE INSPECTION IS TO INSURE THAT THE FILES ARE KEPT SAFE AND THE PRIVATE INFORMATION YOU TAKE FROM APPLICANTS IS KEPT SAFE FROM VISITORS ETC. IF YOU HAD 10 APPLICATIONS IN YOUR HOME/APARTMENT AND SOMEONE DID GET THAT INFORMATION AND USE IT FOR IDENTITY THEFT THE CONNECTIONS COULD NEVER BE MADE. THAT IS ONE REASON IDENTITY THEFT IS GETTING TO BE A WORSE PROBLEM THEN MOST REALIZE. THE INSPECTION PROCESS IS TO INSURE FOR THE COMPANY’S LIABILITY THAT YOU HAVE THE PROPER STORAGE AND DISPOSAL PROCEDURES. THEN IF IN FACT YOU DONT DO THE RIGHT THING THE COMPANY IS NOT LIABLE FOR DAMAGES.

  4. I believe that I can help you. You are certainly not the only one experiencing these challenges as the industry continues to tighten the requirements for gaining information. We are private investigators and have such good data, that many of our clients find it unnecessary to order “credit reports”. I think you will be amazed at the kind of data that we provide in our tenant screening reports. For more information and sample reports, go to http://tenantscreeningbackgroundcheck.com I am confident that once you start obtaining your background check reports from us, you won’t feel the need to use anyone else.

    Alexis Wellington

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