Tips for Landlords: How to Notify Applicants of “Adverse Action”

As landlord, you should always screen the applicants for your rental property. This will help you determine if the applicant will be a desirable renter. As you screen residents, you basically have three choices:

  • Accept the applicant unconditionally

  • Accept the applicant with conditions

  • Reject the applicant

The first option is easy. You send the applicant an acceptance letter, and everyone’s happy. The second two options, however, are considered adverse actions; that is, they run counter to the applicant’s interests and to the interests of any co-signer. Adverse actions include the following:

  • Rejecting the applicant

  • Requiring a co-signer to guarantee rent payments

  • Charging a deposit you don’t normally charge new residents

  • Charging a larger deposit than you typically charge

  • Charging higher rent to cover the increased risk

Even if you use a third-party service to screen applicants, you’re solely responsible for notifying the applicant that you decided not to rent the unit to the applicant. However, the service you use may be able to provide you with a Notice of Adverse Action form that you may use.

The Notice of Adverse Action must contain the following details:

  • The name, address, and telephone number of the consumer-reporting agent — the screening firm — that provided the report

  • The prospect’s right to a free copy of the report

  • The prospect’s right to dispute the report’s accuracy and completeness

  • The adverse action you’re taking; for example, rejecting the applicant or requiring a co-signer

The FCRA requires that you provide oral, written, or electronic notice of the adverse action. Always provide your notice in writing and keep a copy for your records.

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