Denying Applicants: A Short Guide

It’s critical to lawfully deliver rental decisions when going through the screening process, especially when denying applicants.
by Michael Lucarelli | Updated: Jan 14, 2020

When looking through rental applications, sometimes you have no choice but to reject an applicant, whether it be because of their credit score, eviction report or something else. It can be tough to know how to handle denying applicants as there are some common questions that come to mind:

  1. Do you have to give notice when denying applicants?
  2. How can you let an applicant know he or she has been denied?
  3. What requirements must you follow under the FCRA?

It’s critical to lawfully deliver rental decisions when going through the screening process. Here’s what you need to keep in mind as you screen tenants.

When to use a denial letter

A denied rental application letter is also known as an adverse action notice. What is this? An adverse action is an action that you take when you want to communicate an unfavorable circumstance to an applicant. According to the FCRA, your adverse action notice must be done orally, in writing or electronically.

When you’ve finally concluded the rental application process, you have three responses you can give to applicants:

1. Accept
The simplest of the three decisions is the ‘accept’ decision. Accepting an applicant doesn’t require you to do anything special, so feel free to let the applicant know of your decision however you like.

2. Accept on condition
This decision is an ‘accept,’ but only if the applicant were to meet additional requirements. 

Some examples of an accept on condition:

  1. Requiring a guarantor/co-signer on the lease title
  2. Requiring a deposit that might not be needed for other applicants
  3. Requiring a larger amount for a deposit
  4. Raising the price of rent

When you use any consumer reports (credit, criminal or eviction reports) as part of your decision, you’re likely triggering a requirement to deliver an adverse action notice to tenants to let them know your final decision. Later on, we’ll cover what that notice should include.

3. Deny
Your last option is to deliver a straight denial, or denying applicants. When you reject an applicant, your decision is typically made using some combination of rejection criteria, consumer reports and rental application materials. Your adverse action notice commonly contains your decision to deny as well as why you made the decision.

To avoid discrimination when denying applicants, please consult with an experienced landlord/tenant attorney.

The bottom line: according to the FCRA, if you based your ‘accept on condition’ or ‘deny’ decision on a consumer report, then it’s likely that you need to let applicants know of your adverse decision using an adverse action notice.

What is required on an adverse action notice?

Even though FCRA guidelines say you can deliver your decision orally, in writing or electronically, you might consider rendering your decision in writing. Giving your decision orally does not leave a paper trail that you can lean on in case an applicant claims you violated the law. According to the FCRA, a few crucial items need to be on an adverse action notice:

  • The phone number, name and address of the agency who provided the report
  • A statement that the consumer reporting agency didn’t decide any unfavorable actions
  • Notice that the applicant can dispute inaccuracies found on the report and that he or she is entitled to a free report if requested within 60 days

Sending an adverse action notice isn’t always the easiest thing to do, so you should take extra precautions to ensure you’re not violating any regulations. Being mindful of the law can help keep you out of trouble. While you should watch out for things like discrimination, sending an adverse action can also help prove that you are acting within certain FCRA guidelines. In the end, it’s your responsibility to protect you and your business.

About Rentals.com tenant screening

Rentals.com, in partnership with RentSpree, provides an online rental application and screening solution as part of its marketing platform. With it, you can put together a completed application package in one step. This includes a completed rental application, credit report and score, criminal background check and national eviction history. Rentals.com handles the entire screening process for you and takes just two minutes to start screening! Better yet, you can receive all reports back instantly at the property or at another time of your choosing. Visit https://www.rentals.com/tenantscreening for more information.

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