How do you avoid discrimination claims when rejecting an applicant based on credit history?

1 Set clear and consistent standards

The first step to avoid discrimination claims is to establish clear and consistent standards for your credit screening criteria. You should have a written policy that outlines the minimum credit score, income, debt-to-income ratio, and other factors that you require from applicants. You should also explain how you obtain and verify the credit information, and how you handle any errors or disputes. By having a clear and consistent policy, you can show that you are applying the same standards to all applicants, regardless of their protected characteristics.

2 Follow the FCRA guidelines

The Fair Credit Reporting Act (FCRA) is a federal law that regulates how you can use consumer reports, such as credit reports, to make decisions about applicants. The FCRA requires you to obtain the applicant's written consent before you request their credit report, and to provide them with a copy of the report and a summary of their rights if you take any adverse action based on the report, such as rejecting their application. The FCRA also requires you to notify the applicant of the specific reason for the adverse action, and to give them the contact information of the credit reporting agency that provided the report. By following the FCRA guidelines, you can protect yourself from claims of unfair or inaccurate credit reporting.

3 Document your decisions

Another way to avoid discrimination claims is to document your decisions and keep records of your screening process. You should keep copies of the applications, credit reports, consent forms, adverse action notices, and any other relevant documents for at least one year, or longer if required by your state or local laws. You should also document any conversations or correspondence with the applicants, and note any reasons for rejecting or accepting them. By documenting your decisions, you can provide evidence of your legitimate and nondiscriminatory reasons for rejecting an applicant based on their credit history.

4 Train your staff

If you have staff members who are involved in the screening or leasing process, you should train them on how to comply with the fair housing laws and the FCRA guidelines. You should also monitor their performance and conduct regular audits to ensure that they are following your policies and procedures. You should also have a clear complaint and resolution process for any issues that may arise with the applicants or tenants. By training your staff, you can prevent any mistakes or inconsistencies that could lead to discrimination claims.

5 Seek legal advice

The fair housing laws and the FCRA are complex and constantly evolving, and they may vary depending on your state or local jurisdiction. Therefore, it is advisable to seek legal advice from a qualified attorney who specializes in landlord-tenant law and fair housing law. An attorney can help you review your screening criteria, policies, and documents, and advise you on how to handle any potential or actual discrimination claims. By seeking legal advice, you can minimize your liability and protect your rights as a property manager.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?