On October 16, 2018, the Federal Trade Commission (“FTC”) announced that RealPage Inc. (“RealPage”), a Texas consumer reporting agency focused on tenant screening, has agreed to pay $3 million to settle charges brought by the FTC that the company failed to take reasonable steps to ensure the accuracy of tenant screening information that it provided to landlords and property managers. According to the FTC’s announcement, this amount is the largest civil penalty the FTC has obtained against a background screening company. This case underscores the FTC’s continued interest in the accuracy of consumer reports and also has broader lessons regarding matching practices utilized by consumer reporting agencies. It also is a reminder of the high potential cost of violating the Fair Credit Reporting Act (“FCRA”).
The FTC filed its Complaint against RealPage and the agreed upon settlement agreement in the U.S. District Court for the Northern District of Texas (Dallas Division) on October 16, 2018. RealPage, a company based near Dallas, provides background reports about consumers to thousands of client rental property owners and property management companies throughout the United States. The tenant screening reports may include rental histories and public record information, including criminal and eviction histories. The tenant screening reports can also include credit information from the nationwide consumer reporting agencies. According to the Complaint, the FTC alleges that from at least January 2012 until September 2017, RealPage failed to have policies or procedures in place to assess the accuracy of the company’s tenant screening reports. In particular, the FTC alleges that RealPage used broad search criteria at the outset and then applied only limited filters to the broad results and did not have policies or procedures in place to assess the accuracy of the results. In the settlement announcement, Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, stated, “You shouldn’t get turned down for an apartment because someone has the wrong information about you.” Smith explained that “[t]his case shows that, especially with today’s tight rental market, we will hold tenant screening companies responsible for the accuracy of their reports.”
RealPage compiled tenant screening reports through an automated system that used the applicant’s first name, middle name (if available), last name, and date of birth when searching for criminal record information on applicants. The FTC alleges that RealPage’s matching criteria required an exact match of an applicant’s last name only, whereas the company used a “soft”, or non-exact, match for first name, middle name, and date of birth. For instance, if RealPage conducted a search for an applicant named Anthony Jones born on 10/15/67, it would deem a match if it found a criminal record for Antony Jones 10/15/67, Antonio Jones 10/15/67, and Antoinette Jones 10/15/67.
The FTC’s Complaint alleges that RealPage failed to meet its obligations under Section 607(b) of the FCRA to follow reasonable procedures to ensure maximum possible accuracy of its consumer reports, including an unreasonable failure to “employ adequate filtering of the broad search results its searches returned” and an unreasonable failure to “take steps to assess the accuracy of the results it returned in instances where there were internal inconsistencies between records or results that clearly included information on multiple individuals before transmitting tenant screening reports to clients.” According to the FTC, these failings led to multiple instances where consumer reports were furnished to landlords and property managers with criminal records of individuals other than the applicant, including “(a) individuals with a different name from the applicant (including names that are not common nicknames or slight misspellings of the applicant’s name); (b) individuals with a different date of birth from the applicant; (c) multiple individuals with different names, dates of birth, and differences in other identifiers such as gender or race; and (d) multiple individuals with different photographs.” The latter photographs apparently derived from state sex offender registries.
In addition to the $3 million civil penalty, the proposed settlement also requires RealPage to maintain reasonable procedures to assure the maximum possible accuracy of the information it includes about individuals in its consumer reports. RealPage is also subject to compliance and reporting requirements. The settlement order, however, does not prescribe specific matching steps that must be taken by RealPage, only enjoining the company from future violations of FCRA § 607(b).
Ultimately, the case is a clear sign that the FTC intends to continue to focus on FCRA enforcement and on the accuracy of consumer reports going forward. The Bureau of Consumer Financial Protection has likewise recently shown increased interest in the accuracy of consumer reports. As such, consumer reporting agencies should consider reviewing their accuracy policies and procedures in light of the deficiencies alleged by the FTC in the RealPage case, including a review of whether the consumer reporting agency’s matching practices produce outcomes similar to those the FTC found fault with in the RealPage case and a review of their quality assurance processes to ensure that any accuracy issues are identified early. The FTC alleged that RealPage’s failures extended over a more than five year period between January 2012 and September 2017.