A tenant screening company has agreed to pay a $4.2 million settlement over the accuracy of tenant screening reports given to property management companies, according to a release from the Federal Trade Commission (FTC).
The FTC said the allegations involved facts that the firm failed to follow reasonable procedures to ensure the accuracy of its background screening reports about potential tenants given to property management.
In the complaint, filed by the Department of Justice on behalf of the Commission, the FTC alleges that AppFolio, Inc. violated the Fair Credit Reporting Act (FCRA) by failing until at least April 2019 to implement reasonable procedures to ensure that criminal and eviction records it received from a third-party vendor were accurate before including such information in its tenant-screening reports.
In addition, the FTC alleges AppFolio also violated the FCRA by including eviction or non-conviction criminal records more than 7 years old in its reports.
The complaint says the company:
- Failed to follow reasonable procedures to assess whether the identifiers in criminal records and eviction records reasonably matched the applicant’s before including the records in tenant-screening reports.
- Failed to follow reasonable procedures to assess whether there were internal inconsistencies in the identifiers or results that clearly included information on multiple individuals before including criminal records and eviction records in tenant-screening reports.
- Failed to follow reasonable procedures to assure that the eviction and criminal record information contained in consumer reports it furnished accurately reflected the disposition, offense name, and offense type.
- Failed to follow reasonable procedures to prevent the inclusion of multiple entries for the same criminal or eviction action in the same report.
“Consumers face enough hurdles in obtaining housing without the additional burden of inaccurate background checks,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, in the release. “AppFolio and all background-screening agencies must follow reasonable procedures to ensure that the background reports that they provide to their customers are as accurate as possible.”
The complaint says AppFolio (defendant) “obtained criminal records and eviction records for inclusion in tenant-screening reports from a third-party vendor, CoreLogic National Background Data, LLC or Core Logic Screening Services, LLC (‘CoreLogic’). Defendant implemented insufficient procedures to assess the accuracy of the information it obtained from CoreLogic before including the information in tenant-screening reports. Rather, defendant generally relied on CoreLogic’s procedures for matching the information from a consumer’s housing application to criminal-record and eviction-record information in public records, retrieving those criminal records and eviction records from public records, and accurately returning those records to defendant. However, defendant had limited knowledge of the procedures CoreLogic used to match, retrieve, and return criminal records and eviction records to defendant.
“CoreLogic’s contract with defendant disclaimed any guarantee as to the accuracy of the data it provided. For example, one contract provision stated, ‘[Defendant] acknowledges that [CoreLogic] cannot guarantee the accuracy and/or completeness of the consumer information furnished’,” the complaint states.
Property managers use AppFolio’s reports for tenant screening. Under the FCRA, companies that provide tenant screening background reports on consumers are required to follow reasonable procedures to ensure the “maximum possible accuracy” of those reports, and are prohibited from reporting certain obsolete information.
The FTC alleges that AppFolio failed to implement procedures to adequately review the accuracy of the information it received from its vendor before including the information in background reports.
Inaccurate information caused some tenants to be denied housing
As a result, AppFolio provided inaccurate information about some applicants, such as records for individuals with a different name or birthdate; records with a missing or inaccurate offense name, type, or date; records with a missing or inaccurate disposition; and multiple entries for the same criminal or eviction action.
The FTC alleges that some applicants may have been denied housing or other opportunities because of the inaccurate information included in background reports provided by AppFolio.
Despite receiving numerous complaints from consumers, the tenant screening company AppFolio did not make changes to its procedures that addressed the problems with the reports, the FTC alleges.
In addition to the $4.25 million monetary penalty, the proposed settlement prohibits AppFolio from providing non-conviction criminal or eviction records older than seven years and requires the company to maintain reasonable procedures to ensure the maximum possible accuracy of information included in its background reports.
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