Giving Notice of Rejection to Tenants Based on a Consumer Credit Report

A landlord must provide written notice to a prospective tenant if the landlord takes any adverse action against the prospective tenant based on information contained in a consumer credit report according to California Civil Code Section 1785.20.

Q 1. What must a landlord do if she/he decides to reject a prospective tenant?

A  A landlord must provide written notice to a prospective tenant, if the landlord takes any "adverse action" against the prospective tenant (such as rejecting the applicant) based on information contained in a consumer credit report (Cal. Civ. Code § 1785.20).

Q 2.  What is "adverse action"?

A "Adverse action" means a denial or revocation of credit, a change in the terms of existing credit, or a refusal to grant credit.  In a landlord-tenant context, adverse action includes any adverse action taken with respect to an application for the renting of a dwelling unit, including rejection of a prospective tenant or refusal to renew a lease (Cal. Civ. Code § 1785.3(a)).

Q 3. What information must the notice contain?

A The notice of adverse action must be in writing and must contain the following information:

• A statement that the landlord's decision was based in whole or in part on information contained in the consumer credit report (Cal. Civ. Code § 1785.20(a)(3));
• The name, address, and telephone number of the consumer credit reporting agency which furnished the report to the landlord (Cal. Civ. Code § 1785.20(a)(2));
• A statement that the applicant has the right to obtain, within 60 days, a free copy of the applicant's report from the credit reporting agency identified in the notice and from any other credit reporting agency which compiles and maintains files on consumers on a nationwide basis(Cal. Civ. Code § 1785.20(a)(4)(A));
• A statement that the applicant has the right, under California Civil Code Section 1785.16, to dispute the accuracy or completeness of any information in the report furnished by the credit reporting agency (Cal. Civ. Code § 1785.20(a)(4)(B)).

Q 4.  How does the landlord provide the written notice?

A The law does not specifically address this question. However, the landlord's delivery of the notice to the applicant in person or by first class mail with postage prepaid would be acceptable methods of delivery.

Q 5.  Is the landlord liable for failing to provide the notice?

A If a landlord is determined to have negligently violated this law, a prospective tenant can recover actual damages, including court costs, attorney's fees, and, when applicable, pain and suffering.  If a landlord is held liable for willful violation, a prospective tenant can recover the damages described above, plus punitive damages of not less than $100 nor more than $5,000 for each violation, and any other relief which the court deems proper.  (Cal. Civ. Code § 1785.31.)

However, a landlord will not be held liable for failing to provide the notice if the landlord shows "by a preponderance of the evidence that at the time of the alleged violation he or she maintained reasonable procedures to assure compliance" with the notice requirements (Cal. Civ. Code § 1785.20(c)).

Q 6.  Does a prospective tenant have the right to dispute the accuracy or completeness of the information?

A Yes.  A written complaint may be filed with the consumer credit reporting agency. The credit reporting agency must investigate the dispute within a reasonable period of time and without charge and report the results of the dispute within 30 days after the credit reporting agency receives notice of the dispute. This right is provided for under both federal and California law (Cal. Civ. Code § 1785.16; 15 USCS §1681i.)

Q 7.  Does a prospective tenant have the right to obtain a copy of the credit report from the landlord?

A Yes.  If the prospective tenant has paid a nonrefundable application screening fee to the landlord or the landlord's agent, the landlord must provide a copy of the credit report to the prospective tenant (Cal. Civ. Code § 1950.6).

Q 8. Where can I obtain additional information?

A  The three nationwide consumer reporting companies – Equifax, Experian, and TransUnion – announced that consumers may request a free annual credit report. Consumers in 13 Western states--including California--are able to make requests by visiting www.annualcreditreport.com, calling 877.322.8228, or mailing a standardized form to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.