Tenant ScreeningAvoiding Lawsuits & Regulatory Action

Agenda

Part I – The Exposure (Risk)• Disparate Impact Theory• Negligent Leasing (Liability) Exposure• Consumer Reporting Law (State & Federal)

Part II – Risk Management (Best Practices)• Rental Criteria• Negligent Leasing (Report Quality)• Compliance

• Elements of a meritorious claim– Facially neutral practice– Disproportionate impact on protected individuals– Arguable business necessity – reasonable alternative

• Discussion– Criminal?– Civil (eviction)?– Credit?

• Defense– Business necessity – no reasonable alternative

Disparate Impact Discrimination

• Elements of a meritorious claim– Tortious act of resident– Within scope of residency– Discoverable propensity– Lack of (or insufficient) due diligence

• Negligent leasing cases– Charlotte Housing Authority– Wilmette Real Estate & Management

Negligent Leasing Exposure

• Facts– Charlottetown Terrace – for elderly & disabled– Dunlap-Green murdered by neighbor (2007)– NC criminal search conducted by the Housing Authority– Lengthy (discoverable) criminal history – Maryland

• Finding– In favor of plaintiff (2010)– Plaintiff estate awarded $132,000 (v $10 million sought)

• Lesson?– Criminal search methodology – it matters!– Report quality – “maximum possible accuracy”

Charlotte Housing Authority

• Facts– Chicago apartment community– Melissa Dorner, 21– Raped, beaten and strangled to

death by another resident - 2005– Unverifiable SSN

• Finding– In favor of plaintiff (2012)– Awarded $10 million– 10% assigned to Wilmette

• Lesson?

Wilmette Real Estate and Management Company

• Federal Fair Credit Reporting Act (FCRA)– Reporting Restrictions– Requirements on Users

• Relation to state laws– Access & Use Restrictions?

• Legal & Regulatory Actions– Disputes– Disclosures

Consumer Reporting Law

• Criminal Records Criteria– Arrests– Convictions (Felony v Misdemeanor)– Pending Cases– Dates of Final Disposition– Blanket Policy v. Schedule of Offenses

• Eviction Records Criteria– Filings– Paid vs. Unpaid– Findings in Favor of Defendant (Resident)– Verifications v Eviction Records

• Verifications… more important than ever!!

Best Practices

Disparate Impact Exposure

• Criminal Records Search Methodology– AKA’s

– Additional Addresses – Disclosed & Undisclosed

– Record Matching

• Criteria

• Control

Best Practices

Negligent Leasing Exposure

• End User (Landlord)– Permissible Purpose– Written Authorization– Notice of Adverse Action– Records Retention & Disposal

• CRA (Screening Company)– Accuracy– Report Restrictions– Dispute Handling– Consumer Request for Report

Best Practices

Consumer Reporting Law