The three major credit bureaus have taken a great deal of fire lately - from regulators (the Federal Trade Commission - FTC) and the press (60 Minutes - for example) - regarding the accuracy of consumer credit reports and the handling of disputes.  The anecdotes are compelling.  Our hearts go out to those whose credit is negatively impacted due to identity theft or a mistake on the part of the creditor (or Furnisher as defined by the Fair Credit Reporting Act).  But what is the true scope of the problem - the error rate and the extent to which errors negatively impact consumers? 

The FTC issued its fifth interim Report to Congress regarding credit report accuracy in December 2012 as required by the FACT Act.  The study sampling was 1,001 consumers and 2,968 reports (roughly three per consumer).  The study found that 6.6% of reports examined contained errors that when corrected resulted in a score increase - but only 2% of those had a score increase of 25 points or more.  Only 2.2% of reports examined had credit score increases sufficient to move them to a lower credit risk classification - reduce their borrowing costs. 

So roughly 98% of scores accurately drive the proper credit risk classification.  Not bad, right?  But if you are among the roughly 2% assigned to a higher risk tier due to an error - it is not good enough!

It is important to recognize, as Congress did when passing the Fair Credit Reporting Act (FCRA), that the banking system and, arguably, the entire economy "...is dependent upon fair and accurate credit reporting".  It is equally important to recognize that it is the interest of all concerned (Consumers,  Furnishers, End-users and CRA's) to do the very best we can to improve upon and ensure the:

1. Accuracy of data furnished and maintained by creditors and others;
2. Proper use of that data by CRA's and End-users;
3. Prompt and effective handling of disputes; and
4. Transparency of the entire process. 

It is transparency more than anything else that improves accuracy, and it is the humble notice of Adverse Action that is the primary driver of transparency in consumer reporting - including tenant and employee screening.  The FCRA defines Adverse Action as any action that is adverse to the interest of the consumer.  Denial of tenancy as a result of a tenant background check certainly falls within that definition - but so too is requiring an additional deposit or co-signer.  Denial or termination of employment based on an employee screening report is an Adverse Action as well.

§615 of the FCRA requires that users of consumer reports (like landlords and employers) provide oral, written, or electronic notice of adverse action to the consumer - if Adverse Action is taken in whole or in part due to the content of a Consumer Report.  These notices must include:

1. The name and contact information for the Consumer Reporting Agency;
2. Notification of the consumer's right to a free copy of their report; and
3. Their right to dispute the accuracy and completeness the report.

Note that section §604(b)(3) goes even further by requiring that such notice be delivered prior to taking such action based on consumer reports used for employment purposes - and that such notices include a copy of the report and description in writing of the rights of the consumer as outlined in §609(c)(3) for the FCRA. 

Best practice #4 

Provide written Notice of Adverse Action AND the CFPB Summary of Rights document prior to taking adverse action of any kind - include a copy of the report when such action is based in whole or in part on a consumer report used for employment screening purposes.

The FCRA allows for verbal notification.  Don't do it!  Written notice of Adverse Action fulfills (and documents fulfillment of) your obligation under the FCRA.  As important, it increases the likelihood that the consumer will actually see a copy of their report and exercise their right to dispute anything that is reported in error - which goes to accuracy!

Note that §607(c) of the FCRA states that "A consumer reporting agency may not prohibit a user of consumer reports... from disclosing the contents of a report upon which adverse action is taken.  This applies beyond employment screening, where doing so is required.  So you may, if requested and if you wish, share the content of a tenant screening report (for example) when adverse action is taken - assuming, of course, you have taken (and documented) steps to confirm the identity of the applicant and that feel safe doing so.

Visit Moco-inc.com or MyScreeningReport.com for sample Adverse Action notices and other helpful tools and information. 

posted @ Wednesday, May 15, 2013 3:31 PM | Feedback (0)

Just say NO... to rental history database searches!

The Federal Trade Commission recently warned the operators of six websites that share information about consumers’ rental histories with landlords that they may be subject to the requirements of the Fair Credit Reporting Act (FCRA).  The letter clearly states that "...If <these firms> assemble or evaluate information on individuals’ rental histories and provide this information to landlords so that they can screen tenants, <they> are a consumer reporting agency (“CRA”) that is required to comply with the FCRA."

Bottom line... if it looks like a duck, walks like a duck and quacks like a duck, it's a duck - frantic quacks and wing flapping aside!!  It is quite likely then, that these folks will be found to be Consumer Reporting Agencies and that rental history database searches used for tenant screening purposes are Consumer Reports as defined by the Fair Credit Reporting Act.  What then are the implications?

As CRA's, these firms must (among other things):

1. "...follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates;
2. Give consumers a copy of their information upon request;
3. Allow consumers to dispute information they believe is reported in error; and
4. Advise End-users (landlords) of their obligation to notify consumers (applicants) if Adverse Action is taken based in whole or in part on the results of the search.

But there is more!  Landlords subscribing to these services are generally "Furnishers" as well as "End-users" under the law.  So they must comply with section §623 (as well as §615) of the FCRA.  While landlords may be familiar with End-user obligations, few are familiar with requirements set forth in section §623 - "Responsibilities of furnishers of information to consumer reporting agencies".  Here are just a few:

1. Provide accurate Information;
2. Correct and update information <as needed>;
3. Provide notice of disputes associated with information submitted <to the CRA>;
4. "...have in place reasonable procedures to respond to any notification that a consumer is the victim of identity theft;
5. Promptly reinvestigate disputes concerning the accuracy of information furnished and report the results of that investigation to the CRA; and
6. You get the idea....

Banks and credit card companies are intimately familiar with requirements imposed on data Furnishers and have the knowledge, tools and resources needed to fully comply.  The process is automated which reduces the odds of human error.  Information is submitted and updated automatically.  Data furnished is purely objective - e.g. credit limits, outstanding balances, payment history, etc.  Few landlords or property managers are similarly equipped - which raises concerns about the completeness and accuracy of data returned.

So to recap...

1. Firms offering tenant history database searches to End-users for tenant screening purposes are Consumer Reporting Agencies.
2. Rental history database searches are Consumer Reports.
3. CRA's and their products (Consumer Reports) are regulated by state and federal consumer reporting law - which impose specific requirements on CRA's, End-user's AND Furnisher's of the rental history data.
4. Participating landlords are typically "Furnishers" AND End-users of rental history database data - and, therefore, subject to requirements set forth in section §623 as well as section §615 of the FCRA.
5. The quality of rental history database data is uncertain - given the way the data is collected - the lack of the knowledge, tools and resources necessary to ensure the completeness, accuracy and objectivity of the data submitted.

Finally, and perhaps most important - without the protections afforded by the FCRA, rental history database products may result in blacklisting of individuals (Consumers) without their knowledge - which most would agree is patently unfair.

So... here is Tenant & Employee screening Best Practice #3:  Just Say No - to rental history database searches! 

Do rental verifications instead.  They are old-school but very effective.  Do them yourself or outsource them to your tenant screening company.  Just do them!  You will get better data without the risk inherent in either Furnishing or using "rental history database" information.

This post is part of a series devoted to tenant & employee screening "best practices".   See Best Practices 1 & 2.  Visit Moco Incorporated or MyScreeningReport.com for more information about comprehensive tenant screening products - including rental verifications. 

posted @ Wednesday, May 01, 2013 9:09 AM | Feedback (0)

The Federal Trade Commission (FTC), Consumer Financial Protection Bureau (CFPB) and the Equal Employment Opportunity Commission (EEOC) are attacking their regulatory responsibilities with renewed vigor - potentially complicating life for landlords and employers, as well as Consumer Reporting Agencies (tenant and employee screening agencies, credit bureaus and other data providers).

A combination of the financial crisis, passage of Dodd-Frank, consumer complaints, bad press, legislation and litigation promises to accelerate the trend.  So now is a great time to take a hard look at your tenant and employment screening practices. 

This is the first in a series of posts that will explore tenant and employee screening "best practices" - practices that will provide you with the information you need to make good decisions while minimizing the likelihood of consumer complaints, regulatory action or lawsuits.

Best Practice #1

Do business with reputable and Fair Credit Reporting Act (FCRA) compliant consumer reporting agency (CRA). Why?

We have a choice in business.  We can (try to) know and do everything ourselves or we can focus on our core business and partner with experts in other areas - like consumer reporting.  Doing business with reputable and legally compliant business partners is essential to the latter.  Most claim to be FCRA compliant.  How then do I know?

First of all, reputable tenant and employee screening services take End-user compliance very seriously - starting with section §604(f) of the FCRA which states that, "...A person shall not use or obtain a consumer report for any purpose unless... the report is obtained for a purpose for which the consumer report is authorized to be furnished under this section; and the purpose is certified in accordance with section §607 by a prospective user of the report..."  Reputable CRA's will require  a formal site inspection - to confirm and to document that you exist, that you are who you say you are (as an End-user) and that you have "Permissible Purpose" under the law - e.g. tenant or employee screening.  Beware of those who do not.

Reputable and compliant CRA's know state and federal consumer reporting law - inside and out.  They provide a wide range of tools, forms and processes that, by their very nature, assure compliance - such as tenant and employment applications, disclosure and authorization forms, adverse action notices, CFPB Notice to Users and Summary of Rights forms, etc. 

Why you care:

You care because a failure of your background check company to comply with their obligations as a CRA and to provide the tools and processes necessary to assist you with compliance increases the risk of a potentially devastating regulatory action or FCRA-based lawsuit.  You care because you (as an End-user) have numerous obligations under the FCRA and unless or until you become an expert in consumer reporting law, you are dependent on your tenant or employee screening company - to provide you with tools and processes you need to assure compliance.  You care because you too are a consumer.  It is important to all of us that our sensitive personal information is used only for legitimate (or permissible) purposes, that it is handled in ways that minimize the risk of identity theft and that the process is fully transparent. 

Best Practice #2

Beware of CRA's who claim or act as if they or their products are somehow exempt - not subject to the FCRA.  Why?

The FCRA defines a Consumer Reporting Agency as "...any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports."  Note that there is nothing in the definition that limits this requirement to those furnishing consumer credit reports.

One might argue that the FCRA is overly complex and burdensome.  Few would argue, however, with its purpose - "... to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information in accordance with the requirements of this title."   The bottom line is that the FCRA is written to protect all of us - consumers and End-users - which calls into question those who would seek to end-run it's requirements.

Note that the FTC recently "...warned the operators of six websites that share information about consumers' rental histories with landlords that they may be subject to requirements of the Fair Credit Reporting Act."  The warning went on to say "... companies’ obligation to protect the privacy of tenants whose information they collect, including ensuring that those requesting information about tenants have a legitimate reason to acquire it <Permissible Purpose>.  The letter reminds the companies of their obligation to ensure that the information they provide is accurate, to give consumers a copy of the information about them on request, and to allow consumers to dispute information they believe is inaccurate.  The letters <further> note that the companies must notify landlords of their requirements if they use the data to deny housing to a tenant, and to notify the sources of their information of the requirement that they provide accurate information."

Why you care:

Accuracy and fairness are, at the end of the day, important to all of us - consumers, landlords and employers.  The FCRA requires accuracy and fairness.  Provisions requiring CRA's to provide copies of reports to consumers upon request - and that require End-users (landlords and employers) to provide Notice of Adverse Action - are all about transparency.  Transparency is arguably the best way to assure accuracy and fairness (the proper use of sensitive consumer data).  What then, is the appeal or value of non-FCRA products - products and services not held to FCRA standards?   Rather little, I think.

Again, this is the first in a series of posts that will explore a broad range of tenant and employee screening "best practices" - practices that provide you with the information you need to make good decisions while minimizing the likelihood of consumer complaints, regulatory action or lawsuits.  Visit Moco Inc or MyScreeningReport.com® for more information about the FCRA and consumer reporting.

posted @ Tuesday, April 23, 2013 12:54 PM | Feedback (0)

Washington's Residential Landlord Tenant Act (RLTA) includes specific protections for victims of domestic violence (DV). 

RCW 59.18.575 states that "If a tenant notifies the landlord in writing that he or she or a household member was a victim of an act that constitutes a crime of domestic violence, sexual assault, unlawful harassment, or stalking.... and they have a valid protection order... or if <they>...reported the domestic violence, sexual assault, unlawful harassment, or stalking to a qualified third party acting in his or her official capacity... the tenant may terminate the rental agreement and quit the premises without further obligation under the rental agreement."

RCW 59.18.580 states that "A landlord may not terminate a tenancy, fail to renew a tenancy, or refuse to enter into a rental agreement based on the tenant's or applicant's or a household member's status as a victim of domestic violence, sexual assault, or stalking, or based on the tenant or applicant having terminated a rental agreement under RCW 59.18.575.

SB 5568 - currently before the Washington legislature - reinforces the above DV victim protections by prohibiting "tenant screening service providers" from reporting a tenant's, applicant's, or household member's status as a victim of domestic violence, sexual assault, or stalking, or knowingly  disclosing that a tenant, applicant, or household member has previously terminated a rental agreement under RCW 59.18.575.

Victims of domestic violence are protected - meaning it is illegal for landlords to discriminate in any way on the basis of victim status.  Professional owners and managers know and comply with the law.  But that doesn't mean they won't be sued?  And what about independent rental owners - who may be unaware of the law and become the target of such a claim?

Ultimately, the best defense against claims brought under this statute (RCW 59.18.580) is "not knowing".  So the last thing you want in your file is a tenant screening report that identifies an applicant, resident or household member as a victim - since persuading the court that you did not know becomes an order of magnitude more difficult under those circumstances! 

Moco, Incorporated and MyScreeingReport.com do not report DV victim information.  Never have.  Nor have any of the reputable tenant screening services we know.  Ultimately, SB 5568 simply codifies what are already best practices among property management and consumer reporting professionals and which are consistent with current law.  It is for that reason that many of us in consumer reporting and property management communities either do not oppose or actively support Senator Hobbs bill (SB 5568).

Visit www.moco-inc.com or www.myscreeningreport.com for more information about high quality and legally compliant tenant screening reports. 

posted @ Friday, April 05, 2013 3:13 PM | Feedback (0)

Tenant screening as we know it today is a relatively new practice fueled by strides in the quality and availability of consumer credit and public records information.  Comprehensive tenant background checks quickly followed - adding rental references, employment verification and recommendations.

About 10 years ago the market began to embrace the so-called "quick" model - computer generated background checks based on the premise that scored credit combined with an instant public records search is sufficiently predictive to obviate the need for the more thorough (and accurate) but time consuming comprehensive tenant screening product.  Some abandoned use of rental references altogether.

But the landscape is changing yet again, driven largely by the emergence of the "disparate impact legal theory". Under this theory (for which there is substantial and growing precedent), "facially neutral" business practices have been shown (statistically) to disproportionately impact protected groups from the basis of discrimination claims.  One example of such a practice is use of arrest records (versus convictions) to deny tenancy (or employment).  It is well established that doing so has a disparate impact on some (protected) groups. 

Disparate impact discrimination claims are difficult to defend.  Once a practice is shown to have a disparate impact on a protected group, the burden shifts to the defendant (landlord or employer) to prove "business necessity" - defined as a legitimate business purpose that justifies an employment background check or tenant screening practice as valid and necessary for the effective achievement of the organization's objectives and the safe and efficient operation of the business.  Add to that the collective view that we are innocent until proven guilty and use of an arrest record alone to deny tenancy or employment is a risky practice and simply not done by human resource and property management professionals.

There has been relatively little (disparate impact) activity around use of credit for tenant screening purposes - suggesting that it (the credit data) meets the business necessity test.  There is and has been, however, a great deal of legislative activity (at the state and local level) directed at limiting use of public records data (criminal & eviction) for tenant screening purposes - fueled in part by the disparate impact argument.

California's Consumer Credit Reporting Agencies Act , for example, prohibits reporting of "Unlawful detainer actions, unless the lessor is the prevailing party.  The Act further states the lessor shall be deemed to be the prevailing party only if (A) final judgment was awarded to the lessor (i) upon entry of the tenant's default, (ii) upon the granting of the lessor's motion for summary judgment, or (iii) following trial, or (B) the action was resolved by a written settlement agreement between the parties that states that the unlawful detainer action may be reported".  Note that the majority of unlawful detainer actions are dropped prior to issuance of a judgment - not because the filing is without merit, but because the tenant either paid or moved out, and because pursuing a judgment is expensive and of the odds of recovery are low. 

In 2010, California Senate Bill 1149 amended section 1161.2 of the Code of Civil Procedures to further prohibit access to unlawful detainer records until 60 days after the complaint was filed.  This is truly unfortunate, since the eviction we (as landlords) are most concerned about is the one that just occurred - the reason the applicant is looking for a new rental or apartment home. 

California may be leading the charge in this area, but they are not alone.  Similar restrictions are being considered in other states.  So while eviction searches remain worthwhile, there is little doubt that the value will diminish going forward - which bring me to my point!

Rental verifications may be old fashion, but they are quickly becoming more important than ever!  

Done well... rental verifications is often the best predictor of  future lease performance.  If an applicant has a history of paying rent on time, complying with rules and regulations, giving proper notice and leaving their unit in good condition - they will (in all likelihood and notwithstanding their current credit standing) do so again.  If on the other hand, the applicant has multiple late payments and noise complains - if they failed to give proper notice and trashed the place - they are a dubious risk, regardless of their income, credit standing and public records history. 

Done well are the operative words.  Done well means asking the right questions in the right way - questions which elicit only objectives responses - such as:

1. Number of late payments and NSF checks?
2. Number of documented noise complaints?
3. Number and types of notices served?
4. Has proper notice been given?
5. Has the resident been asked to vacate?  If so, why?
6. Any damage to the unit?
7. Is (or was) there a balance owing the landlord?
8. Has the lease term been fulfilled?

Done well means using the necessary resources to confirm that you are speaking to the landlord - versus a "plant". Done well means doing the research necessary to determine whether additional addresses on the credit report are rental housing and, if so, contacting those landlords as well. 

Note that there is for some, an exaggerated fear of being sued for defamation.  But if we are truthful... if we limit our questions (and responses) to those outlined above...  the risk is relatively small. 

Ultimately, there is little doubt that verifications will play an increasingly important role as we compensate for growing restrictions on access to (and use of) the public record.  So whether you do them yourselves or you outsource them to others - just do them!

Visit Moco Inc and MyScreeningReport.com for access to a wide range of information and resources for property managers and landlords.

posted @ Tuesday, April 02, 2013 2:50 PM | Feedback (0)

Few would question the value of conducting background checks when it comes to employees or volunteers whose work might bring them into contact with vulnerable individuals – children, the elderly or infirm.  Businesses, government and volunteer organizations have a well-established duty to exercise care in vetting prospective employees and volunteers under these circumstances.  A failure to require and utilize a background check report would undoubtedly fail the “reasonable care” test – should disaster strike.

Whether to conduct background checks on prospective roommates is a matter personal risk tolerance versus a legal or ethical duty. 

But if you are even a little uncomfortable with the notion of inviting a stranger into your home – given the availability and low cost of background checks – why wouldn’t you conduct a background check?

Background check reports are “Consumer Reports” as defined by the federal Fair Credit Reporting Act (FCRA).  Background check companies are “Consumer Reporting Agencies” (CRA’s) and those who purchase background checks are End-users as defined and fall within the vigorous regulatory framework of the Consumer Financial Protection Bureau (CFPB).  There are several provisions of the FCRA that are worthy of note in this context:

1. Consumer Reports (background checks) may only be purchased and produced for certain purposes (referred to as “Permissible Purposes” under the FCRA).  Employment (paid or voluntary) is one such purpose.  A business transaction initiated by the consumer is another and likely applies to screening of roommates. 

2. End-users are required to “certify” their Permissible Purpose to the CRA.  The CRA is obligated to confirm the identity & Permissible Purpose of prospective End-users.  This process is time consuming & expensive and tends to limit access to these services to larger employers and volunteer organizations.

3. End-users (employers and volunteer organizations) are required to get written authorization prior to procuring a Consumer Report – and to provide Notice of Adverse Action (prior to and after that action is taken) if that action is based in whole or in part on the content of the background check report.

There are additional requirements, but you get the idea.  Purchasing an FCRA compliant background check report on a 3^rd party is complicated and often impractical for small organizations & individuals. 

There is another approach, however.  It is based the fact that consumers (applicants or prospective roommates in this context) have every right (under the FCRA) to order a background checks on themselves and to share that information with anyone they chose.  There is a new breed of consumer report known as a “direct-to-consumer” report – and a new breed of Consumer Reporting Agency that exists to support this model.

The direct-to-consumer model is ideal for small organizations and individuals – who are unable or unwilling to submit to the traditional certification process.  Rather than ordering a report on an applicant, applicants order reports on themselves, review the report for accuracy and then share it with prospective employers (or roommates).  Consumer reporting agencies specializing in this model offer a secure means for doing so – so there is no question as to the authenticity of the report.

Quality

There is no point in conducting a background check if the identity of the consumer is suspect or the data returned is otherwise unreliable.  It is important to know that no single criminal database or combination of databases will consistently deliver high quality reports.  Doing so requires use of a combination of tools – some available instantly, some not.  It starts by authenticating the consumer – the prospective roommate, for example.  It involves searching aliases and previous addresses, and confirming that records returned are exact matches - correctly associated with the subject of the report.  A failure to do these things will result in under-reporting valid criminal hits (by as much as 30%) and over-reporting of erroneous hits (especially in the case of common names). 

Conclusion

There is little question as to the need to screen (conduct background checks on) employees and volunteers who work is vulnerable populations.  Actually, there is little question as to the need to adequately screen employees and volunteers of all kinds – for the safety of others and to mitigate the “negligent hiring” exposure.  Ultimately, there is little question as to the need for individuals to protect themselves by screening prospective roommates.

Quality matters – a lot!  It is important to know what tools are used to confirm the identity of the consumer and conduct the criminal search, and whether AKA’s and previous addresses are searched and records returned are correctly associated with the individual in question.

Legal compliance and access to quality background checks are a problem for small organizations and individuals.  Direct-to consumer background checks address the problem by putting the applicant in control of their own data and by providing a mechanism to share their report with prospective employers, volunteer organizations and others (roommates).  Visit MyScreeningreport.com® for more information about these innovated new (direct-to-consumer) background check products.

posted @ Tuesday, March 12, 2013 4:37 PM | Feedback (0)

While background check reports vary in terms of content - virtually all include a criminal records search.  For that reason, the words "background check" and "criminal records search" are often used interchangeably - within the context of tenant and employee screening reports.  Ultimately, there is little question as to the importance criminal records data to landlords and employers. 

That said, it pays to understand the tools available to mine criminal records data - and the advantages and disadvantages of each.  Here goes:

• County-level criminal search - county-level searches are conducted by "runners" who go to the county courthouse and actually search physical or electronic court records. 
  • Advantage:  Accuracy
  • Disadvantage:  Time-consuming (2-3 days is common) and expensive ($20 per name/DOB combination is common)
  • Disadvantage:  Limited to a single jurisdiction and (typically) a single name and date of birth
• Live state-wide criminal search - a growing number of states offer access to county level court records through a state-wide (electronic) repository.
  • Advantage:  Accuracy - as accurate as county-level criminal searches
  • Advantage:  Up-to-date (often real-time) data - updated each time a county clerk hits the "Enter" key or shortly thereafter
  • Advantage:  Fast (data is returned instantly)
  • Advantage:  Covers entire state rather than a single county
  • Advantage:  Practical to search AKA's
  • Disadvantage:  Users must learn multiple systems
• National criminal records databases - these are proprietary systems offering national coverage - though the type, quality and freshness of the data varies considerably by state.
  • Advantage:  Fast
  • Advantage:  Wide net
  • Advantage:  Inexpensive
  • Advantage:  Data quality varies by state, but can be quite good - frequently updated and complete
  • Advantage:  Includes department of corrections, sex offender registry and OFAC/SDN data (see below)
  • Disadvantage:  Quality varies by state and can be quite weak - including only department of corrections and sex offender registry data
  • Disadvantage: Data sometimes includes arrest data or incomplete information like date of birth, nature of offense, final disposition, etc.
• Department of Corrections data - typically accessed via one of the criminal database products.  Includes information regarding those who've been incarcerated.
  • Disadvantage: Does not include any offense for which a person was not incarcerated like misdemeanor offenses
• Sex offender registry - contains information regarding level II and level III sex offenders
  • Advantage - data quality - complete, accurate and contains adequate identifiers (including a pictures of offenders)
  • Advantage - wide net - ability to search nationally
  • Disadvantage – excludes level I offender information
• Office of Foreign Asset Control (Specially Designated Nationals) database search – also known as an OFAC or SDN search.  Returns information from multiple federal databases dealing with international terrorism, drug trafficking, money-laundering, etc.
  • Advantage – compliance with presidential Executive Order 13224 which prohibits doing business with so-called Specially Designated Nationals
  • Advantage – quick & inexpensive

Selecting the right criminal records tool(s) and search methodology defies a cookie-cutter approach since options vary by jurisdiction and requirements vary by End-user. That said and where available, live state-wide criminal repositories are the primary criminal records tool of choice - given quality, speed and cost considerations.

County-level searches deliver great quality but are expensive, time consuming and quite limited in terms of names & geography searched.  Yet in the employment screening realm - when state-wide repositories are not an option – given strict quality requirements associated with employment screening - they are the primary tool of choice.

Criminal records database products are quite useful in the hands of a skilled researcher - someone familiar with quality and update frequency by jurisdiction and who can bring other resources to bear – such as live-state-wide or county-level searches – to achieve the “maximum possible accuracy” standard required by the FCRA.  Landlords may rely exclusively on criminal database products due to cost and turn-time considerations – especially where data quality and update frequency are good.

Layering a national criminal database search with either live state-wide or county-level searches is ideal – since it combines the quality of a live search with the coverage of a database search and since national criminal database products generally include department of corrections, sex offender registry and OFAC/SDN searches.

Criminal background checks are an essential part of any tenant or employee screening report.  The quality and coverage of these can vary dramatically, however, so it pays to understand exactly what your criminal background search entails – the tool(s) and methodology employed.

Visit MyScreeningReport.com® or Moco Incorporated for more information about criminal background checks.

posted @ Wednesday, February 20, 2013 11:24 AM | Feedback (0)

A sex offender registry (registry) search is, or should be part of all tenant or employee background checks.  So it is helpful to understand the history behind the registry - what it is and how it works.

42 USC § 16911 defines a sex offender as "...an individual (adult or juvenile) who was convicted of a sex offense" which falls within one of the following tiers:

• A Tier I sex offender is defined simply as an offender other than a Tier II or Tier III offender.
• A Tier II sex offender is an offender (other than a Tier III offender) whose offense is punishable by imprisonment for more than 1 year and (when committed against a minor) is comparable or more severe than sex trafficking, coercion and enticement and transportation with intent to engage in criminal activity - or involve use of a minor in a sexual performance, solicitation of a minor to practice prostitution or production or distribution of child pornography - or involves an offense committed after the offender becomes a Tier I offender.
• A Tier III sex offender is an offender who offense is punishable by more than 1 years and is comparable or more severe than aggravated sexual abuse of sexual abuse; or abusive sexual contact against a minor who has not attained the age of 13 years - or involves kidnapping of a minor or occurs after the offender becomes a Tier II offender. 

There is more, but you get the idea.  Tier I offenders are considered low risk to re-offend, Tier II moderate and Tier III high risk to re-offend.  States are responsible for assigning offenders to the proper Tier or Level within these guidelines.

History

1994 - Federal Omnibus Crime Bill (including the Jacob Wetterling Crimes Against Children and Sex Offender Registration Act) required each state to create specific programs for registration of sex offenders. 

1996 - Megan's Law amended the Wetterling Act to require the release of sex offender information to the public for their protection.  This was followed by the Pam Lychner Sex Offender Tracking and Identification Act which allowed the FBI to create a national database of sex offender information and required lifetime registration for those who commit the most egregious offenses. 

2006 - Adam Walsh Child Protection and Safety Act increased mandatory minimum sentences for sex offenders and established uniform standards regarding registration.  Dru's law then established the nationwide online sex offender database to facilitate the search for sex offender information by zip code or geographic radius.

Sex offender registries are maintained by each state, territory and tribe and are available directly and via the National Sex Offender Public Website.   Searches may be conducted nationally, by state, territory, tribe or based on a geographic radius from a specific location.  Since Level I offenders are considered low risk, they typically do not appear in the registry.

While a thorough criminal search may reveal offenses for which registration is required, practical considerations and reporting restrictions (found in consumer reporting law) may limit access to that information.  Sex offender registry data, on the other hand, is quite good and not subject to the aforementioned quality considerations or reporting limitations. 

Note that California prohibits reliance on the sex offender registry to deny tenancy.  There is, however, no such limitation on use of conviction data for that purpose.

Conclusion

A sex offender registry search is a logical extension of the criminal search.  They add very little to cost or turn-around time.  They provide a level of redundancy and reach that helps protect residents, employees and clients - as well as mitigate your exposure to negligent hiring (or leasing) claims.  Contact your background check service today.  Ask whether sex offender registry searches are included in your reports and, if not, that they be added.  Confirm that the search includes (or will include) AKA's and additional addresses.  

Visit MyScreeningReport.com or Moco Incorporated for more information about tenant and employee background checks.

posted @ Friday, February 15, 2013 3:09 PM | Feedback (0)

There are significant differences between tenant and employment background check companies – differences that matter a great deal to landlords, employers and consumers (applicants).

There is no shortage of background check companies offering instant access to a wide variety of consumer information – from credit reports to public records searches.  But they vary considerably – in terms of the quality of the data they provide and compliance with state and federal consumer reporting law.

FCRA Compliance

Background check companies (Consumer Reporting Agencies or CRA’s) and users of background check services (End-users) are subject to the Fair Credit Reporting Act (FCRA) and are tightly regulated by the Consumer Financial Protection Board (CFPB). 

The FCRA imposes a wide range of requirements on CRA’s and End-users.  It is a complex regulatory environment and a failure to comply can be devastating to the End-user as well as the background check company.  End-users rightfully look to their background check company for assistance with compliance, including End-user certification, required disclosures & authorizations and adverse action notifications.  So step one in selecting a background check provider is to do a little background checking of your own.

Start with a careful review of the CRA’s web site.  Look closely at:

• “About”
      - Look for red-flag statements like these:
            - “We are not a Consumer Reporting Agency”.
            - “Our products are not to be considered screening products for employment,
                insurance, and credit screening, etc.; and anyone who
                uses  our reports for such purposes assumes sole responsibility for FCRA compliance.”
      - If it looks like a duck, walks like a duck and quacks like a duck... it is a duck! 
        If the company and their reports fall within those definitions in the FCRA – then they
        are a CRA and they and their End-users must comply with the FCRA.

• “Contact Us”
      - Reputable businesses provide complete contact information, including telephone
        and fax numbers, email and mailing addresses. 

• “Services”
      - Are they a database (only) play – are all products returned instantly?
      - Do their public records searches automatically include aliases, multiple addresses, etc.?
      - Do they offer credit reports – which in turn require credit bureau compliance (a positive sign)?

Consider membership requirements.  You should have to jump through some hoops prior to ordering and receiving background check reports.  FCRA compliant background check companies will generally require that you:

• Certify your Permissible Purpose.  The FCRA limits use of consumer reports to certain “Permissible” purposes – like rental housing, employment, loan processing, etc.

• Confirm your identity – and that your identity is consistent with your Permissible Purpose.

• Submit to a site inspection – used to further confirm identity and permissible purpose, and to ensure adequate security for the consumer data.

Don’t forget to do a Google search.  Search on the business name.  Look for lawsuits and regulatory action.  Locate their Better Business Bureau (BBB) rating – to confirm an A+ rating and (ideally) BBB accreditation.  Ask for references. 

Confirm that the provide a complete library of legally compliant forms – including disclosure & authorization forms, adverse action notices and the CFPB Summary of Rights document – as well as instructions regarding their use.

Note that direct-to-consumer background checks, such as those available from MyScreeningReport.com®, eliminate the need for end-user certification – appealing to private landlords & small employers – for whom the above membership protocol may be impractical.

Report Quality

Quality is a big deal.  Incomplete or inaccurate background checks may result in granting tenancy or hiring someone who poses a risk and represents a liability to the landlord or employer.  Conversely, bad data may result in the loss of a good tenant or employee – unfair to you and the applicant. 

Speed and price can be the enemy of quality (and ultimately, compliance).  Credit reports are an exception to the rule.  The quality of credit data and presence of multiple personal identifiers within the credit report make it practical to return complete and accurate credit data instantly.

Public records information is a different story.  Public records databases vary considerably in quality and the presence of personal identifiers.  Search results are generally based on first and last name only – plus date of birth in the case of criminal records.

The FCRA addresses accuracy in several ways.  Section 607(c) which says “…Whenever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” 

There is simply no way to achieve this “maximum possible accuracy” standard and return quality public records data instantly.  Yet public records databases are a great tool in the hands of a skilled investigator – who considers the quality of the data available in a given jurisdiction and employs additional tools as necessary to:

• Determine whether there are aliases or additional addresses to search; and  

• Accurately match records returned with the applicant in question. 

The alternative (which is common) is to return all name (or name and date-of-birth) matches – and leave the landlord or employer to their own devices to order additional searches and confirm matches themselves - which is not fair and, arguably, a violation of the FCRA.

Turn-around time for a quality search should be between 30 minute and 2 working hours – though it can take up to 2-3 days depending on the jurisdiction or if a manual search is required to establish disposition or confirm a match.  Quality reports may cost a few dollars more.  Ultimately, however, it is well worth a few hours and a few dollars to know that a background report is complete, accurate and legally compliant.

The FCRA requires transparency.  One example is the requirement for a Notice of Adverse Action when such action is taken based on the content of a consumer report.  The notice must include contact information for background check company and a summary of the consumer’s rights under the FCRA including:

• The right to a copy of the report; and

• The right to dispute the content of the report.

Note that employers are required to advise applicants of the intent to take Adverse Action before actually taking that action.  The CFPB’s Summary of Rights document must accompany such notifications.  This educates and empowers the applicant - allowing them to dispute data they believe is reported in error before it negatively impacts their search for employment. 

Bottom line:  Report quality and compliance matter – a lot.  It is well worth a little time and a few dollars to make sure you are working with a quality CRA and that their reports are complete, accurate and legally compliant. 

For more information about background check reports and associated resources for landlords and employers, please visit, MyScreeningReport.com®, a product of Moco Incorporated. 

posted @ Friday, February 08, 2013 10:34 AM | Feedback (0)

Use of employment background checks has exploded over the last several years – due in large part to the ease of access to applicant (consumer) data through the Internet.  Coincident with that trend is greater scrutiny of background check companies (Consumer Reporting Agencies – CRA’s) and employers (End-users) by regulators, including the Equal Employment Opportunity Commission (EEOC), the Federal Trade Commission (FTC) and more recently the Consumer Financial Protection Bureau (CFPB) – created and generously funded by the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010.

Employers conduct background checks for several reasons.  Background checks help determine whether the applicant is a good fit for the position – critical given the enormous direct and indirect cost associated with “bad hires”.  Secondly, it serves to mitigate the “negligent hiring” liability exposure – by reducing the likelihood of a claim and demonstrating reasonable care, should one occur. 

There is a substantial body of law regulating consumer reporting, including employment background checks.  The federal Fair Credit Reporting Act (FCRA) is primary, but state (and more recently municipal) law may also apply. 

Knowing and complying with the FCRA is challenging enough.  But staying on top of state, federal and municipal consumer reporting law can be overwhelming – particularly if the employer operates in multiple states.  Add to that the growing risk of a disparate impact discrimination claim and one is tempted to forgo the process altogether.  Bad idea!

The good news is that there are best practices, which if adhered to, provide the employer with the information they need to make good hiring decisions while keeping them out of trouble with regulators and the plaintiff’s bar. 

Employment Background Check Best Practices

●     Work only with a reputable and legally compliant employment background check service – those who require you to go through an extensive certification process prior to utilizing the service and who limit use of their reports to a specific or Permissible Purpose – employment screening in t his case.

●     Avoid ads or posts designed to screen (disqualify) applicants up front based on criminal history or derogatory credit. 

●     Do not ask about criminal records in the initial employment application.

●     Make the background check the last step in the employment process – subsequent to a conditional offer subject to completion of a satisfactory background check.

●     Require applicants to complete and sign a separate disclosure and authorization form (separate from the employment application) – disclosing that a background check will be conducted and authorizing you (the employer) to do so.  Note that employment screening disclosure and authorization forms may vary by state. 

●     Avoid use of credit reports unless credit is truly job related.  A rapidly growing number of states prohibit use of credit reports for employment purposes unless that information is “substantially job related”.  Use of credit for executive level positions, positions in finance or that involve access to cash or sensitive personal information are generally fine.

●     DO NOT use records of arrest.  Avoid a blanket policy regarding criminal convictions.  Develop a list of offenses you believe are pertinent to the position (not as hard as it sounds).  Consider mitigating factors presented by the applicant and avoid use of old convictions – the date of final disposition of which is more than seven years old.

●     Provide a copy of the employment background check report to all applicants – whether or not adverse action is taken.

●     Advise applicants that you are considering taking adverse action based on the content of the background check report BEFORE you take that action – to give them a chance to provide mitigating factors – yourself a chance to consider those factors.

●     Advise the applicant if or when you decide finally to take adverse action based on the content of the report.

The availability of consumer data for employment screening purposes is (or can be) a valuable tool.  Yet there is a potential downside.  What if the data is inaccurate?  What if the data is accurate but not truly job related… or has a disparate impact on protected individuals?  The FCRA, Title VII of the Civil Rights Act, as well as state and local law) are intended to address these concerns.  Following the above best practices will protect applicants, provide employers with the information they need to make sound hiring decisions and reduce the risk of legal or regulatory action.  Visit Moco Incorporporated or MyScreeningReport.com® for more information about employment background checks.

posted @ Friday, January 18, 2013 11:06 AM | Feedback (0)