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Tenant Screeners Can’t Compare Names and Draw Conclusions

Screening tenants is okay but only if based on valid data. A CFPB rule, backed by HUD, says relying on “same name comparisons” is a fair housing violation.

WASHINGTON – The CFPB issued an advisory opinion affirming that consumer reporting companies, including tenant and employment screening companies, violate the law if they engage in shoddy name-matching procedures.

CFPB didn’t explain why it thinks some tenant screeners’ algorithms might base part of a review on a check of people with the same name. However, regulators said they’re concerned about disqualifying an applicant from rental housing or a job simply because they have the same name as another individual with negative information in their credit history.

Specifically, the CFPB affirmed that the practice of matching consumer records solely through the matching of names is illegal under the Fair Credit Reporting Act.

CFPB says the risk of mistaken identities from name-only matching is likely to be greater among Hispanic, Black and Asian communities because there is less surname diversity in those populations.

“When background screening companies and their algorithms carelessly assign a false identity to applicants for jobs and housing, they are breaking the law,” says CFPB Director Rohit Chopra. “No one should lose out on a job or an apartment because of sloppy and illegal matching. Error-ridden background screening reports may disproportionately impact communities of color, further undermining an equitable recovery.”

Federal Trade Commission Chair Lina M. Khan says it’s discrimination “based on careless errors.”

In the United States, most landlords and employers rely on tenant screeners and employment background checks when deciding whether to accept a rental application or offer someone a job. Some of the companies providing these services are subsidiaries of the nationwide credit reporting agencies, while others are newer entrants to the background screening industry. Because of the scale of background screening activity, even low error rates can harm significant numbers of consumers.

The CFPB says that federal courts have consistently found that the use of name-only matching procedures – when a consumer reporting company uses only first and last name to determine whether a particular item of information relates to a particular consumer, without using other personally identifying information such as address, date of birth or Social Security number – does not assure maximum possible accuracy of consumer information.

The advisory opinion does not create a safe harbor to use insufficient matching procedures involving multiple identifiers. Other practices, for instance the same name combined with a date of birth, could also lead to cases of mistaken identity.

CFPB says it will be working with the Federal Trade Commission to root out illegal conduct in the background screening industry. Background screening companies found in violation of the Fair Credit Reporting Act can be liable for civil penalties, restitution for victims, damages, and other relief.

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