When Mark Morris switched apartments last fall, his new landlord asked him to pay $25 for a credit check. It is a charge that most renters have come to expect and accept, but Morris wanted to know exactly what his money was buying.
Eventually, Morris learned that his landlord had purchased “tenant screening services” from the Apartment Association of Seattle King County (AASK), a non-profit corporation that lobbies for the interests of landlords. AASK had purchased a credit check from Equifax, a national company with annual sales of $1.5 billion. AASK paid Equifax $8 for the credit report, then billed Morris’ landlord $20.63. The landlord in turn raised the price to $25.
When he called AASK to ask about the 200-plus-percent mark-up, Morris says, “They told me I had no right even dialing their number if I wasn’t a landlord.” He decided to deduct the difference between the $25 he was charged and the $8 that AASK paid to Equifax in his next rent payment. In return, he received an eviction notice. He had to pay back the difference plus a $100 late fee to avoid being kicked out.
Chris Benis, the president of AASK, verifies that his organization provides two levels of tenant screening services, one for $16 plus tax, the other for $19 plus tax. “We resell information,” he says. “We don’t do any investigative reports.” Benis explains that the 200-percent increase covers the time AASK staffers spend looking up civil and criminal records on the SCOMIS Internet search engine. But anyone who’s ever done a SCOMIS search knows it doesn’t take more than a minute or two.
“I don’t see [tenant screening] as a money-maker so much as providing a service to our members,” says Benis.
It’s illegal for a landlord to charge more for a credit check than it actually costs. But when’s the last time someone’s been charged exactly $20.63 for a credit check? Unfortunately, a renter’s only recourse when overcharged is to take the landlord to small claims court, where it costs $30 to file, and the most you can win is $100.
Twenty-five bucks may seem like a minor expense to a renter paying a thousand or two for first and last months’ rent plus security deposit, but if considering that (a) more than half of the people in Seattle rent; (b) more than half of the rentals turn over each year; and (c) tenants often pay for three or four (supposedly) different credit checks each time they move, one can see there’s money to be made in this racket. A little over a decade ago, there weren’t any tenant screening companies in the Puget Sound area. Today there are 36 companies listed in the Seattle phone book under credit reports, and 13 of them specifically advertise tenant screening services.
Bruce Neas of Columbia Legal Services says, “The problem with the screening companies is, they see the landlord as their client, when it’s the tenants who are their clients. The tenants should get a copy of the report. They’re the ones who paid for it.”
But landlords rarely if ever provide copies of the credit reports to renters. In fact, AASK specifically tells its members not to do so. As a result, “The tenant never really knows whether the landlord does any screening,” notes Neas. “And the tenant doesn’t get to see what the contents of the report were, to figure out what the problem is and how to fix it.”
State law requires a landlord to tell prospective renters exactly what the credit check pays for and the name and address of any companies used. Federal law mandates that if a tenant is turned down for a house or apartment, the landlord must send a letter of denial including the phone number of the credit company, so that the tenant can call and get a copy of the report for free, within a reasonable amount of time.
But in practice, most people just pay the fee and never find out what they bought, if anything. The last thing a renter wants to do when the first of the month is coming up and they are one of 15 people vying for an apartment is give the impression they’re a whiner.
Bruce Neas thinks screening reports should be both accessible and portable, so that a renter could re-use the same report while looking for a new place, rather than paying for the same service three times in a weekend. Neas was part of a landlord/tenant work group that examined the issue at the state level in 1994/95. But they didn’t get too far with their proposal, and the screening scheme, a growth industry of sorts, has since drawn more new players, including AASK.
Benis says he has “no idea” how often AASK resells credit reports or how much money the organization brings in by selling credit reports. He doesn’t even know what AASK’s annual budget is. “I’m just the president,” he says.
News intern Jill Wasberg contributed to this report.
There is now a solution for a “portable” screening resource!
Visit:
http://www.MyScreeningReport.com
I have used http://www.RemoveMyCreditInquiries.ORG to remove inquires off of my credit report to raise my FICO score before. They charge only $15 to remove inquiries. They also remove late comments from credit reports too.
Ben / Jill: please cite the specific laws (RCW? Federal HUD Statute?) you mentioned in your article, so good renter folks and landlord folks can see the facts….? (aka have proof in case they want to push the point)
“It’s illegal for a landlord to charge more for a credit check than it actually costs.”
“State law requires a landlord to tell prospective renters exactly what the credit check pays for and the name and address of any companies used.”
“Federal law mandates that if a tenant is turned down for a house or apartment, the landlord must send a letter of denial…”
However, well done on the awesome quotable: Benis says he has “no idea” how often AASK resells credit reports or how much money the organization brings in by selling credit reports. He doesn’t even know what AASK’s annual budget is. “I’m just the president,” he says.
If someone has a VC in their pocket, I’ve got a great business plan idea that will both make profit AND make this more fair for everyone (except for those several leechy companies).
The challenge is that state law and federal law do not always comply. Washington state law does not require that landlords provide WRITTEN notice of adverse action. Notice can simply be verbal. It is also true that adverse action also included what are called “conditional” approvals. If an applicant is Approved with and Increased Deposit, this is also concerned adverse, and notice is required.
The best way to address these challenges is through education, which unfortunately, is often lacking.
MyScreeningReport.com allows consumers to review their report BEFORE they apply. Gives them an opportunity to dispute any discrepancies before there is a problem.
Deliverstransparency that our industry has been in desperate need of.
In addition, there is no effect to credit score, as it creates a “soft” inquiry due to it being consumer-initiated.
See more at http://www.MyScreeningReport.com
With the complexity of landlord-tenant law and relations as a given…
this article is trifling and barkey. Divisive and not useful or interesting.
Mutual benefit is a worthy aspiration. Try writing with this and perhaps a better sense of maturity in mind. May I suggest: You have more to contribute – and that is my humble suggestion.
I have $45,000 cash in hand ready to purchase a manufactured home in Thurm’s Mobile Home Park in Calverton, NY. The park is touted as a 55 and over retirement park, yet applications must be sent to First Advantage Safe-Rent for approval.
To make a long story short, I was denied for no reason because First Advantage never contacted any of my references, yet had the nerve to deny my application because I am receiving social security benefits, which they claim is not an income. Apparently a retired person needs to get a job before applying to these “retirement” communities. A search on my credit reports shows that I have a credit score of 650. The lot rent at Thurm’s is $200 less than what I pay at my current mobile home park. It would actually be cheaper for me to live there.
My realtor and the park manager (Patty) are standing behind me on this. They tell me that nobody has ever been denied an application to Thurm’s. First Advatange blames Morgan Management (the park’s owner) and Morgan Management blames First Advantage for this determination, so this tells me that neither side wants to take responsibility; an admission of guilt. An internet search shows numerous lawsuits from scams and ibel that were generated by First Advantage SafeRent. Who are they to judge anyone?
Pre-recorded phone announcement (888) 333-2413 instructs one to download dispute forms online at http://www.residentscreen.com, which is not a working website — another scam. In the meantime, I may lose out on the home of my dreams.
Why are they still in business?
I’m a landlord, and we never charge more than the service costs. However, I think if a landlord incurs costs associated with the screening, those can be charged as well, as long as they are disclosed. Optionally, you could also add these charges as a peanu butter spread to your rent each month. So, if you rent a place for $650 per month, perhaps rent it for $655 to cover some of your overhead costs and run the screen for freed this would bring in an additional $60 per year and cover other office expenses you incur related to screening and turnover expenses. For instance, my screening service charges $39 for a full report, and $27 for a “quick report”. I charge $35 to run a report and generally run a full report. However, I fax the application to the screening service and follow up with calls and etc. My fax service costs me $16.95 per month. Or, if I use a local fax shop, it costs $1.99 for the frst page to fax it, and then .99 for each additional page…for our 2 page application, this adds $2 to the cost. Not to mention my drive time and personal time to drive to the fax place and/or (if I use my online fax service) to scan the document and turn it into a PDF or image file and then email it to the service. Also, in our case, we print and provide the tenant a copy of the report. Copies cost time and money too – including the overhead costs of having a printer (toner, electric, etc). So, like any business, overhead costs are justified, provided you either disclose them as such OR incorporate those costs into your product costs (in this case, the monthly rent). My suggestion is to charge a nice round number for the service (in the case above I woudl reccommend $20) and then recoup theother “costs of doing business” as a markup to the base price of your products (rent). So if you need to get $650 in rent for a unit to cover your house payment, and your office expenses cost you $120 per year, then perhaps you might charge $660 for rent. However, if all the market will bear is $650 for the place,then perhaps you will lose money on the deal, and that’s just a cost of business too…markets fluxuate and you can’t expect to get more for a product than the market will bear. If you get too little for your product and have to sell the house, then that’s business too – one of the risks you take.
What I think kind of sucks about the whole thing is that landlords can check your credit, and I think that’s fine, but as a renter, you don’t get ANY kind of credit boost for paying your rent on time and every month. What better indicator of whether or not you are a good mortgage risk? I mean, as a landlord too, aren’t you more interested if, at the end of the day, the rent ALWAYS gets paid? Sure, if someone runs up an asspile of credit card debt, that MIGHT impact their ability to pay their rent, but NOT if someone taught them right; that the roof over your head is THE most important bill you pay.
To make matters worse, an inquiry is a ding on your credit, and they say that multiple inquiries for one thing isn’t supposed to matter, but it does. And also, isn’t FICO coming out with an even more obscure, more cloak and dagger way of generating a credit score? What to do about the renter who “just changed jobs” which is a factor in the new score because they just moved to a new area?
I am a landlord and I also charge a prospective tenant for a full screening. This costs $35 from the screening service, and I do not mark it up. I also email a copy of the report to the tenant, since they paid for it. The screening fee does two things: (1)Only prospective tenants who are actually serious about renting will shell out the 35 bucks, so it saves me a lot of churning.(2) People know what the report is going to reveal, so those who are recently evicted axe murderers tend to not apply. This is good. The screening is just a cost of doing business, which is passed directly on to the tenant. $25 is not unreasonable, regardless of what the landlord pays. I do think it is fair for the tenant to get a copy of the report. I do not know what advantage there is to the landlord to withold it. Just ask for a copy when applying. If the landlord says no, you can choose to walk away. The market works both ways, and right now it is working mostly in the tenants favor. No reason for tenants to not take advantage of it, because when the market tightens up, the landlords certainly will.
Why don’t prospective tenants get to charge for credit reports and BBB reports on the landlords?
#10 Paxton White: You may, if you can. Who is the buyer and who is the seller in the relationship, numbnuts? It is a free market relationship. If you can convince a landlord to pay you to run a credit report on the landlord, nothing in the world is stopping you. Good luck there. You can probably more easily find a landlord that will not require a credit check, if you like living in a crack house.