UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C., 20580
March 17, 1999
Clarine Nardi Riddle, Esq.
National Multi Housing Council
1850 M Street NW
Washington, D.C. 20036
Re: Section 615(b)(1) of the Fair Credit Reporting
Dear Ms. Riddle:
This is in response to your letter requesting the staff's views
on the extent to which Section 615(b)(1) of the amended Fair Credit
Reporting Act (FCRA) applies to the situation where an owner/manager
of residential property takes an adverse action -- i.e.,
refuses to rent or lease a dwelling -- based on information obtained
from the applicant's previous landlord. For the reasons set forth
below, we believe that Section 615(b)(1) does not apply to landlords
in this situation.
Before setting forth our views on this issue, it is important
to note that, as a result of the 1996 amendments to the FCRA,
landlords now have obligations under Section 615(a) the FCRA when
they take adverse actions based on credit reports or other types
of consumer reports (such as reports from tenant screening organizations).
Prior to the 1996 amendments, the Commission took the position
in its Commentary on the FCRA that the landlord-tenant relationship
did not involve "credit" and was, therefore, not covered
by the adverse action notice procedures set out in Section 615
of the FCRA.(1) (At the time, Section 615 required adverse
action notices only in connection with "credit," "insurance,"
or "employment" transactions.) In the 1996 amendments,
Congress changed that result by adding a broad definition of the
term "adverse action" in Section 603(k) of the FCRA.
"Adverse action" is now defined broadly in Section
603(k) of the FCRA to cover adverse actions in credit (including
the denial of credit or the termination of an account), employment
(including the denial of employment), licenses or benefits from
a governmental entity (including denial or cancellation), and
insurance (including the denial of coverage). In addition, Congress
added a broad "catch-all" in Section 603(k)(1)(B)(iv),
which covers, inter alia, all actions or determinations
"adverse to the interests of the consumer" made in connection
with an application made by, or a transaction initiated by, the
consumer. The catch-all provision clearly covers the landlord-tenant
situation. Thus, landlords who use consumer reports must
now provide applicants Section 615(a) adverse action notices when
they refuse to rent or lease a dwelling, or require an increased
security deposit as a precondition to the rental, based on a consumer
However, the issue you raise is a different one: whether landlords
now have any obligations under another portion of Section 615
-- sub-section (b)(1). This sub-section requires notice "[w]henever
credit for personal, family, or household purposes ...
is denied or the charge for such credit is increased . . . because
of information obtained from a person other than a consumer
reporting agency bearing upon a consumer's credit worthiness,
credit standing, credit capacity, character, general reputation,
personal characteristics, or mode of living" (emphasis added).
The notice required by this provision is not triggered by an "adverse
action" as defined in Section 603(k), but has a more limited
trigger -- the denial of (or increased charge for) "credit."
As you can see, Congress did not amend Section 615(b)(1) to refer
to the newly added "adverse action" definition as the
trigger for requiring a notice under this sub-section, and we
have found nothing in the legislative history of the 1996 amendments
that indicates Congress intended to change the Commission's determination
that the landlord-tenant relationship is not generally a "credit"
relationship. It appears that Congress was concerned in the relevant
1996 amendments with the situation where landlords use consumer
reports as a basis for adverse actions, and that it addressed
this issue by adding a fairly broad definition of "adverse
action" to the statute and by referencing this definition
in Section 615(a).
Accordingly, it is our view that the Commission's position in
the Commentary that the landlord-tenant relationship is not a
"credit" relationship remains in force. As a result,
we believe that landlords have no obligations under Section 615(b)(1)
to provide notices when they base an adverse landlord-tenant decision
upon information obtained from persons other than consumer
reporting agencies, such as information from an applicant's
previous landlord. Such a decision does not constitute a denial
of, or an increase in the charge for, "credit" under
I hope that this information is helpful for you. The opinions
set forth in this informal staff letter are not binding on the
Commission. If you have any further questions, please feel free
to contact me.
Division of Financial Practices
1. 16 C.F.R. §600 Appendix, 55 Fed.
Reg. 18804, 18826 (May 4, 1990), comment 615-10.