cult classic The Big Lebowski Proof that mistaken identity can be fun in movies. But for people looking to rent a house or apartment, it’s less interesting when the tenant background reports provided by California company AppFolio include other people’s convictions and eviction records. The FTC’s settlement, which includes a $4.25 million civil penalty, reminds companies like AppFolio to comply with the requirements of the Fair Credit Reporting Act, requiring them to follow reasonable procedures to ensure the accuracy of the information in their reports.
Consumer reporting agency AppFolio collects and combines information obtained from other CRAs to build background screening reports, which it then sells to property managers. Given the harmful impact inaccuracies can have on consumers looking for housing, jobs or other necessities, the Fair Credit Reporting Act requires CRAs such as AppFolio “shall follow reasonable procedures to ensure that information about individuals is as accurate as possible” when reporting relevant content . ” In addition, the law requires the CRA to exclude certain outdated information.
But according to the FTC, AppFolio did not have procedures in place to adequately review the accuracy of the information it received from vendors before including criminal records, deportations, and more into its background reports. Therefore, the complaint states:
- AppFolio failed to follow reasonable procedures to evaluate whether the identifiers in its reported criminal and eviction records reasonably matched the applicant;
- AppFolio failed to follow reasonable procedures to evaluate whether there were internal inconsistencies in identifiers or results, indicating that the company included information from multiple people in a single report;
- AppFolio failed to follow reasonable procedures to ensure that the criminal and eviction records in its reports accurately reflected dispositions, crime designations, and crime types; and
- AppFolio failed to follow reasonable procedures to prevent multiple entries for the same criminal or eviction case from being included in a single report.
The FTC said these failures had serious practical consequences. For example, AppFolio’s tenant background reports sometimes contain information about other people with different names or birth dates, or skewed criminal or eviction records. The complaint also alleges that AppFolio violated the FCRA by containing eviction and unconviction criminal records spanning more than seven years.
In addition to the $4.25 million fine, the proposed settlement requires AppFolio to maintain reasonable procedures to ensure that the information in its reports is as accurate as possible. The order also prohibits the company from including unconvicted criminal or eviction records that are more than seven years old.
This case also raises two additional compliance points for credit rating agencies.
(Repost) Should sellers be careful? Our Latin is atrocious, but the principles are sound. The FCRA’s “reasonable procedures to ensure the greatest possible accuracy” requirement applies to companies that compile their own information and Provided to resellers such as AppFolio, who compile reports based on the vendor’s data. Simply passing on what others tell you without a process in place to evaluate the accuracy of the information is a dangerous and illegal practice. For more great tips, read What You Need to Know About Tenant Background Check Companies About the Fair Credit Reporting Act.
Respond and reassess. The FTC said AppFolio received complaints questioning the accuracy of the information in its reports but did not change its practices to address the issues. It may not seem like it at the time, but consumer complaints can be an effective tool in paving the way for your program. How would your company respond in a similar situation?
If you think we won’t end with a comparison The Big Lebowski and the Fair Credit Reporting Act, think again. As Walter Sobchak said to a man crossing the foul line: “Smoky, it’s bowling. There are rules.” In Walter’s words, “That’s the FCRA. There are rules.” The FTC expects companies to deliver on these promises.
