NCRC and other groups have urged regulators to take action against unjust tenant screening practices. A $20 million enforcement action against TransUnion is a good start.
Leading credit score firm TransUnion faces tens of millions of dollars in penalties for violating tenants’ rights in its role as a major provider of rental background checks to landlords – a promising step toward the broader reforms that the National Community Reinvestment Coalition (NCRC) has called for to protect tenants.
TransUnion allegedly violated the Fair Credit Reporting Act (FCRA) by reporting inaccurate and incomplete information on prospective tenants to the landlords with whom TransUnion’s tenant screening subsidiary works. This is a widespread problem with severe consequences for people seeking housing, as NCRC wrote to regulators in May.
TransUnion is specifically accused of using false, incomplete or unverified information to generate its proprietary “risk score” metric – a blunt tool that landlords who contract with TransUnion then use to deny applicants or charge higher rents to certain tenants. The Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) are jointly seeking a $4 million civil penalty and another $11 million in direct restitution to renters harmed by the alleged violations. (The CFPB is also seeking $5 million more for a separate set of alleged violations relating to the company’s broader credit reporting business.)
Credit scores themselves are inherently blunt gauges of a person’s future financial behavior. But the separate “risk score” system designed for use by landlords specifically is an even less precise tool – a wide net which sweeps up untold numbers of mostly Black and Brown people who have had adverse interactions with the criminal or housing courts system in the past.
The algorithms that companies like TransUnion use to create such “scores” are a “black box,” the CFPB wrote in an Oct. 12 press release announcing the enforcement action, both “relying too often on inaccurate or misleading information” and “conceal[ing] false information from scrutiny.”
In other words: TransUnion doesn’t let anyone see the actual paperwork or claims of fact that feed into a given applicant’s “risk score” – so nobody has an opportunity to say, “Wait a minute. That’s not true,” or appeal in any other way. On top of that, the CFPB and FTC believe the company doesn’t do much to vet the quality of that information themselves before using whatever they’ve found about a person to reduce them down to a number.
These malignant practices alleged in the CFPB and FTC announcement all reflect problems far wider than any one company, algorithm or business practice. Not all interactions with a housing court or even a criminal one are created equal. Public records tied to such interactions are not necessarily complete. A system where prospective tenants can be rejected simply because they ticked “yes” on a question about prior criminal or eviction history is an inherently unjust one.
Such simplistic, binary approaches to evaluating a given person or family’s suitability as a tenant inevitably produce racially biased outcomes, because they replicate the notoriously inequitable outcomes of the American justice system writ large – only without even the modicum of discretion and situation-specific reflection that judges and juries are allowed to employ.
That is why NCRC and our allies will continue pushing for government agencies to both take strong enforcement actions like this one, and overhaul the underlying systems that allow prejudicial landlord practices to continue unchecked.