Learn
FCRA Permissible PurposeFCRA Permissible Purpose

Summary

One of the provisions of the Fair Credit Reporting Act is that reports may only be provided for an FCRA permissible purpose. Among these investigatory and transactional purposes is tenant screening, so rental agents, landlords and property managers are permitted to ask for a credit report and use it as part of the criteria for making a decision about a renter’s financial ability to meet the terms of the lease agreement.

[.blog-disclaimer-text]Disclaimer: This article is not legal advice. Legal information is not the same as legal advice, where an attorney applies the law to your specific circumstances. Consult an attorney for advice on your interpretation of this information or its accuracy. You may not rely on this article as legal advice, nor as an endorsement of any particular legal understanding.[.blog-disclaimer-text]

End users must request reports for a permissible purpose.  Examples of permissible purposes include subpoenas or court orders, written instructions from the consumer, credit transactions with a consumer, employment purposes with written authorization from a consumer, insurance underwriting purposes, tenant screening, and national security investigations.

Congress has limited the use of consumer reports to protect consumers’ privacy. All users must have a permissible purpose under the Fair Credit Reporting Act to obtain a consumer report. Section 604 contains a list of the permissible purposes under the law.  (FCRA sections in the U.S. Code, 15 U.S.C. § 1681 et seq.)   These are:

  • As ordered by a court or a federal grand jury subpoena. Section   604(a)(1).
  • As instructed by the consumer in writing. Section 604(a)(2).
  • For the extension of credit as a result of an application from a consumer, or the review or collection of a consumer’s account. Section 604(a)(3)(A).
  • For employment purposes, including hiring and promotion decisions, where the consumer has given written permission. Sections 604(a)(3)(B) and 604(b).
  • For the underwriting of insurance as a result of an application from a consumer. Section 604(a)(3)(C).
  • When there is a legitimate business need, in connection with a business transaction that is initiated by the consumer. Section 604(a)(3)(F)(i).
  • To review a consumer’s account to determine whether the consumer continues to meet the terms of the account. Section 604(a)(3)(F)(ii).
  • To determine a consumer’s eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant’s financial responsibility or status. Section 604(a)(3)(D).
  • For use by a potential investor or servicer, or current insurer, in a valuation or assessment of the credit or prepayment risks associated with an existing credit obligation. Section 604(a)(3)(E).
  • For use by state and local officials in connection with the determination of child support payments, or modifications and enforcement thereof. Sections 604(a)(4) and 604(a)(5).
Do your tenant background checks comply with Federal Law?
Learn How RentSpree Can Help >>

Background  screeners must also operate with “reasonable procedures” to assure “maximum possible accuracy” of the information concerning the individual.  (FCRA sections in the U.S. Code, 15 U.S.C. § 1681 et seq.)

  • End-users must provide certification to comply with permissible purpose requirement
  • End-users must (1) identify themselves, (2) certify the purpose for obtaining reports, (3) certify the information in the report will be used for no other purpose (Blanket certification).
  • Background screening companies have obligations to show “reasonable procedures” to ensure access to only permissible users.
  • Certify to users that request will be used for a permissible purpose.

Examples of “reasonable procedures” by tenant screeners

  • Conduct on site visits/inspection of users.
  • Check end-user’s business license or documents.
  • Check end-user’s references.
  • Check publicly available information regarding end-user.
  • Periodic audits.

Examples of things that are not permissible include curiosity, litigation in connection with attempts to collect a debt, marketing, or criminal sanctions. Employees of CRAs who knowingly provide consumer reports to those who do not have a permissible purpose could face up to 2 years of imprisonment.

Continue to Adverse Action Notification, or jump to a different article.

  1. Fundamentals of The Fair Credit Reporting Act (FCRA)
  2. Industry Players Under FCRA
  3. Accuracy and Reasonable Procedures
  4. FCRA Permissible Purpose
  5. Adverse Action Notification
  6. Reinvestigation, Disclosures, Disposal of Consumer Information
  7. What is a Consumer Report?
  8. A summary of consumer rights under FCRA
  9. FCRA Litigation
  10. State Versions of FCRA and FCRA California

Cap Rate Calculator

rentspree illustration of calculator

How to use

Enter information in the boxes below to calculate the comparative value of a piece of property in order to determine if it would be a good investment for you.

Property Value

Current market price or listed value
$

Yearly earnings

Anything you make a profit from that has to do with the property
$
$
$
Total A:

$

0.00

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Yearly Expenses

Anything you make a profit from that has to do with the property
$
$
$
$
$
$
Total B:

$

0.00

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Cap rate

0.00

%

Cap rate

$
$

0.00%

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Commission Calculator

How to use

Enter information in the boxes below to calculate the comparative value of a piece of property in order to determine if it would be a good investment for you.

Property Price

$

Commission Percentage

%
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Total Commission

$

0.00

Commission for Each Agent

$

0.00

Total Amount Seller Receives

$

0.00

Rent to Income Ratio Calculator

How to use

Enter information in the boxes below to calculate the comparative value of a piece of property in order to determine if it would be a good investment for you.

Rent-to-Income Ratio Calculator

$
$
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Rent-to-Income Ratio:

0

%

Move-in Move-out Calculators

Move-In Calculator

$
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

1st Month's Prorated Rent:

$

0.00

Additional Move-In Costs (optional)

$
$
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Total Move-In Cost:

$

0.00

Move-out Calculator

$
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Move-Out Prorated Rent:

$

0.00

Start powering your rentals with RentSpree today

Continue to next chapter