New CFPB Rule Backs Tougher Screening Restrictions

Learn more about the agency’s latest rule and what it could mean for prospective resident screening.

By Sam Gilboard |

July 5, 2022 |

Updated July 5, 2022

2 minutes

On June 28, 2022, the Consumer Financial Protection Bureau (CFPB) released an interpretive rule affirming the federal Fair Credit Reporting Act’s (FCRA) limited preemption authority of state laws. In the ruling, the CFPB reminds states of their “substantial flexibility to pass laws involving consumer reporting”, laws that could be potentially more stringent than current obligations under the FCRA. 

The FCRA is the primary federal legislation regulating the safe, accurate and fair handling of consumer credit information by consumer reporting agencies, users of consumer reports and the subjects of reports. Major provisions applicable to the prospective resident screening process regulate what data can or cannot be considered in a consumer report and how to properly notify an applicant of a denial decision. Housing providers balance the requirements of the FCRA with applicable state and local regulation to determine compliant screening practices and procedures. 

The CFPB’s interpretive rule suggests that state lawmaking bodies can and should promote legislation that would bolster restrictions on screening practices. For example, the interpretive rule proposes that state law could “forbid consumer reporting agencies from including information about medical debt, evictions, arrest records, or rental arrears in a consumer report” without triggering the preemption authority of the FCRA. 

State legislatures have considered several bills this year related to tenant screening, as well as legislation governing the availability of certain data when screening housing applicants. In Utah, a measure passed where certain evictions – those at least three years old and have judgement satisfied – would be automatically expunged from an individual’s record. In Louisiana, legislators failed to adopt a bill that would place restrictions on the evaluation of an applicant’s criminal history. 

Prospective resident screening remains an important and necessary function of the leasing process. Efforts by states to undermine or restrict screening processes can risk resident safety, adversely impact the financial viability of a property and create severe implications for the broader housing market. 

For more information on resident screening policy, please reach out to Sam Gilboard, NAA’s Senior Manager of Public Policy.