Claudinne Feliciano was probably the unluckiest winner of New York City’s housing lottery.
In July 2015, she was selected for an affordable apartment at Hunter’s Point South Commons, a city-backed development in Queens. But instead of getting a new, rent-stabilized unit on the Long Island City waterfront, she ended up moving back in with her parents.
The problem traced back a year, when Feliciano’s landlord in Flatiron alleged in housing court that she owed rent and legal fees of nearly $5,100. The landlord then learned Feliciano had paid, and discontinued the case a week after filing it.
The matter should have ended there. It didn’t.
Corelogic Rental Property Solutions, a company which sells tenant screening reports to landlords, told Hunter’s Point about the case, but not how it turned out. As a result, her application was rejected. It happened again when she sought another apartment in Rego Park. Out of options, she returned to her parents’ home in Rockland County.
Feliciano’s story isn’t unusual. Mistakes by reporting agencies disrupt countless rental and mortgage applications.
Fast results, but unreliable
Consumer reporting agencies come in all shapes and sizes. The national credit bureaus Equifax, Experian and TransUnion — the Big Three — provide credit reports. But there are thousands of smaller consumer reporting agencies, the most lucrative being the approximately 2,000 screening companies, which have become a $3 billion industry.
These firms produce automated reports from a vast array of sources, including credit bureaus, lenders, debt collectors, landlords, utilities, housing courts, criminal records, sex offender registries and terrorism watch lists.
However, the data in those reports, as in credit reports, are often incorrect. A review of various federal lawsuits, interviews with housing law advocates, and data from the Federal Trade Commission and the Consumer Financial Protection Bureau suggest that the issue is widespread.
A report on one person might include information from someone else with a similar name, date of birth or Social Security number. It can also be marred by credit lines and missed payments resulting from identity theft, and can list dismissed cases and debt older than seven years, which is supposed to be excluded. Reports have even been known to list rental applicants as dead.
Under the Fair Credit Reporting Act, people can dispute their file and the reporting agency must correct errors within 30 days. Yet the Consumer Data Industry Association, the trade association for consumer reporting agencies, states on its website that this can take “30 or 45 days.”
That’s more than enough time to lose an apartment in a competitive market such as New York City.
It happened last month to a client of Bond New York broker Ekaterina Vorobeva.
A finance executive whose lease was expiring Aug. 31 applied for a Greenwich Village apartment that Vorobeva found. He said the landlord gave him a six-page report from tenant screening company On-Site that showed a sub-700 credit score from Equifax.
If anything negative shows on the report, landlords just say, ‘Next applicant.’
It turned out that someone had fraudulently obtained a credit card in the executive’s name and missed several payments. Vorobeva’s client canceled the card and had the credit card company write a statement explaining the situation. But by then, the landlord had moved on to another applicant.
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In this case, that applicant backed out, and Vorobeva’s client landed the apartment. Still, the executive, who asked not to be named, described the credit-score snafu as “distressing” because he nearly ran out of time to find a place. He even made plans to sleep on a friend’s couch. “I wouldn’t wish it on anyone,” he said.
Vorobeva said fixing errors should not take so long, particularly when it’s clear the individual is not at fault. “Thirty days is a little bit too much, especially for New York,” she said, adding that a week would be reasonable and 72 hours would be ideal. “Nowadays, with such a competitive market and high prices, [if] anything negative shows on the report, [the landlords] just say, ‘Next applicant.’”
Errors aren’t as rare as one would expect. Vorobeva said it has happened frequently with her clients, particularly during the pandemic.
About one in five Americans has at least one error on a Big Three credit report, according to a 2013 study by the FTC. (An industry group previously suggested the error rate was less than 3 percent.) To minimize the effect of mistakes, mortgage lenders usually request a credit report from each of the Big Three and use the middle score. However, when errors do occur, they are often present in more than one report, advocates say.
“It’s pretty rare to see cases where a false reporting only impacts one score because most big companies report to all three bureaus,” said Matthew R. Osborne, a consumer protection lawyer. Osborne said he has represented many homeowners who ended up with a much higher interest rate because of a credit-report error.
Furthermore, the dispute process doesn’t work for most people, according to the Consumer Financial Protection Bureau, which analyzed complaints it received against the Big Three. Complaints are forwarded to a support service, such as Intelenet in India, used by Equifax and TransUnion, and Experian Services Chile in Chile. Employees each process around 90 disputes per day and have little time to review them properly, according to Osborne. Instead, he said, the employees go with the furnisher’s response, which is often that there is no error.
Complaints about the Big Three to the CFPB have accelerated in recent years and totaled more than 700,000 from January 2020 to September 2021.
Tenant screening companies are less studied, and disputing their errors is even more convoluted. Landlords are required to tell tenants if their screening report is declined (or if their rent or security deposit is increased because of something in the report) and which company compiled the report. However, the law is difficult to enforce and landlords don’t always follow through.
Moreover, unlike with employee background checks, landlords are not obligated to show tenants their screening report. And it’s tricky for apartment hunters to find out in advance what a landlord will see on their report.
Housing law advocates say tenants can investigate which screening companies are used by landlords in their area and preemptively request a report, but it’s a tall order for most people.
“Those low error rates that [tenant screening] companies put out, they don’t tell the full story of what’s actually going on,” said Ariel Nelson, an attorney at the National Consumer Law Center who has authored several reports about consumer reporting agency errors.
The numbers are based on how many consumers disputed a report. But it doesn’t take into account that many people don’t challenge them because they don’t know they can or just don’t bother.
“Even if you accept their numbers, and say, ‘This company has a pretty low error rate,’ if you actually look at how many consumers were affected, it’s a lot,” Nelson said.
“A lot of excuses”
In July 2017, Claudinne Feliciano filed a class-action lawsuit against Corelogic Rental Property Solutions on behalf of herself and nearly 2,000 consumers who were similarly denied housing. In February 2021, the court approved a settlement of $864,450. Each member of the class got $450.
Corelogic, which did not admit wrongdoing, said it had sent researchers to manually collect the records from the courthouse but could not maintain current information because of the volume of records and the technological limitations of public access computers, according to court documents.
“They were trying to come up with a lot of excuses,” said James B. Fishman, a consumer rights advocate and one of Feliciano’s attorneys in the suit. “What we were able to show was that they didn’t really have a policy in place to keep these records up to date.”
New York officials have sought to prevent what happened to Feliciano from reoccurring. The state’s Housing Stability and Tenant Protection Act of 2019 prohibited the sale of eviction data. But according to Fishman, tenant screening companies in New York now use data aggregator LexisNexis to collect the information instead of gathering it manually.
New York also updated its housing lottery rules. In 2016, it began restricting rejections based on credit score alone. In 2019, it held that housing court history could no longer be a criterion in selecting tenants. Rental applicants were given 10 days to appeal a rejection. And a rejected applicant has five days to submit a complaint to the city, which can instruct the landlord to reinstate the application.
The Consumer Data Industry Association, which represents consumer reporting agencies, said in a statement that “while there is always room for improvement, our members correct errors when they do occur, learn from their experiences, and work with policymakers and regulators to produce even better outcomes for consumers.”
But Corelogic has been hit with more class-action suits since Feliciano’s. In one, a man named Terry Brown alleged he was rejected for an apartment in Virginia after a sex offender record was misattributed to him in a tenant screening report. The case was settled for $8.2 million.
Another was filed by Marco Antonio Fernandez, a Navy man with top-secret clearance, who said he was rejected for an apartment in Maryland after being confused with Mario Alberto Fernandez Santana, an alleged Mexican drug trafficker. Fernandez sued Corelogic Credco, which provides merged credit reports. The case is pending.
Corelogic, the parent company, eventually made a few changes. In July 2020, it said it would discontinue the tenant screening service that Feliciano had sued, suggesting that it no longer fit the firm’s long-term goals. It sold the unit to a buyer who renamed it SafeRent Solutions.
It’s patently offensive for these agencies to say, ‘It’s not our responsibility if we report false information and landlords make decisions based on it.’
However, the rebranded service was likewise hit with a class-action lawsuit. The case involves Carmen Arroyo, who was unable to move to an apartment with her disabled adult son Mikhail because of a retail theft that he committed before he became disabled.
Filed by the Connecticut Fair Housing Center, the suit has gone to trial. It alleges that the screener’s use of criminal records is a violation of the Fair Housing Act because it disproportionately harms Latinx and Black tenants, who are more likely to have been arrested or convicted than white tenants.
Corelogic RPS initially claimed that the law didn’t apply to it because it was a screening company and not a landlord, but the court disagreed. The company is now arguing that the landlord is ultimately responsible because it sets the eligibility criteria and makes the rental decision. Many tenant screening companies hold the same opinion. Not surprisingly, landlord groups do not.
“It’s patently offensive for these agencies to say, ‘It’s not our responsibility if we report false information and landlords are making decisions based off our false information,’” said Jay Martin, the executive director of New York City–based Community Housing Improvement Program. “It sounds like pure legal — pardon my French — bullshit.”
Still, the cases raise the question: What is stopping screeners from providing information that is complete, accurate and entirely relevant?
“A lot of these companies will advertise that they can return a report in, like, two seconds,” said Ariel Nelson, an attorney at the National Consumer Law Center, suggesting the problem was largely a lack of human oversight. “It takes more time to do it in a more accurate way.”
Neither Corelogic nor SafeRent Solutions responded to requests to be interviewed for this story.
The New York City Council recently renewed its effort to ban criminal background checks of rental applicants, after the real estate industry defeated it last year — with help from tenants who favor screening of their prospective neighbors. One attorney for landlords opined that if lawmakers get their way, the only criteria to get an apartment will be having a pulse.
In response, housing law advocates argue there is no proof that the information in tenant screening reports is truly useful.
Martin held that property owners have a duty to their tenants to make sure new residents don’t have a violent criminal history or are sexual predators. But he called erroneous reports a concern. “You assume that the information you’re making your decisions on is accurate,” he said.
CHIP, said Martin, is willing to work with lawmakers to crack down on bad reports. It seems to him, though, that the problem is upstream.
“It’s really on the consumer reporting agencies to fix their algorithms,” he said.