Housing costs take a big bite out of most Americans’ budgets, especially consumers looking for a suitable place to live during a fluctuating rental market. That’s why the FTC has particular concerns when in their quest for one of the most basic human needs – a roof over their heads –prospective renters are subjected to practices that violate the law. If you’re a landlord, work for a property management company, or provide other services in the rental sector, heed the warning that the FTC looks askance at illegal conduct that could turn home sweet home into home cheat home for renters.
As a general rule, the FTC Act’s broad prohibition on deceptive or unfair practices applies in the rental market. In other words, long-standing legal fundamentals – for example, truthful advertising and clearly disclosed fees – protect consumers looking to rent a house or apartment. What’s more, theFair Credit Reporting Act requires landlords, property managers, and other housing providers, as well as companies that offer tenant background screening reports, to comply with the FCRA when it comes to background checks on prospective tenants.
Recent law enforcement actions demonstrate the FTC’s commitment to honest practices in the rental market and offer a five-point compliance refresher for businesses.
1. Avoid misleading claims in advertising, including on websites, platforms, and social media.Objective representations about properties or services are subject to established FTC truth-in-advertising standards. A case in point isthe FTC’s action against Roomster and its owners brought in partnership with the Attorneys General of New York, California, Colorado, Florida, Illinois and Massachusetts. According to the complaint, Roomster used phony listings on sites like Craigslist to drive consumers to Roomster’s platform. Consumers paid fees for access to supposedly available listings only to learn that the rentals didn’t exist. The FTC and AGs also alleged that Roomster hired a person to flood the internet with tens of thousands of phony four- and five-star reviews. The lawsuit resulted in hefty financial penalties, tough injunctive provisions. and a lifetime ban on the use of incentivized reviews.
The Roomster case offers two more key takeaways. The lawsuit named Roomster’s corporate officers in their individual capacities, as well as the person they paid to create all those bogus reviews. In other words, depending on the facts, individuals may be on the hook personally for violations of the law. Second, what you say online about your properties is advertising subject to the FTC Act’s prohibition on deceptive and unfair conduct. Thinking about priming the pump by having your staff post some positive reviews? Think again. The FTC has brought multiple actions against companies, corporate officers, and others who posted reviews without clearly disclosing their connection to the business. Read theFTC Endorsem*nt Guides and consult compliance resources aboutendorsem*nts, influencers, and consumer reviews.
2. Exercise particular care when targeting lower-income consumers.For low-income families, older adults, and disabled people, meeting the stringent requirements of the Section 8 voucher program is only the first step in their search for housing. They also must find a landlord willing to accept a voucher.Apartment Hunters, Inc. and the individuals behind WeTakeSection8.com and other websites promised that consumers who paid weekly or monthly subscription fees would get access to “500,000+ Section 8 approved or low price apartments and homes for rent nationwide,” allowing them to “find a place within 5-7 days.”But according to the FTC, most of the properties the defendants listed either weren’t available or didn’t accept Section 8 vouchers.
The defendants’ actions subjected low-income consumers to a double whammy of injury. First, consumers had to stretch their already limited finances to pay for services that didn’t live up to the company’s advertising claims. Second, people can spend years on the Section 8 waiting list, but once they qualify, they have a narrow window to find an eligible rental. Time spent chasing down bogus leads puts them at risk of missing the deadline. The $6 million settlement demonstrates the importance of backing up claims about housing availabilities with facts, especially for rentals through government programs like Section 8. It also underscores that in addition to direct dollars-and-cents injuries, wasting renters’ time inflicts financial harm, too.
3. The FTC Act prohibits illegal junk fees and deceptive or unfair pricing practices. It’s Consumer Protection 101: Consumers can’t meaningfully comparison shop for anything – including rental housing – if they don’t know the actual price they’ll have to pay or if companies fail to disclose mandatory fees or bury them in fine print, behind vague hyperlinks, or in dense blocks of legal jargon. The onus is on landlords and property management companies to make sure that consumers know exactly what their rent will be. The FTC has an established law enforcement record of actions challenging concealed charges. Most recently, the FTC hasproposed a rule that would help strengthen the long-standing fight against junk fees – hidden and bogus fees that harm consumers and undercut honest businesses. Companies also have an obligation to be transparent about material terms and conditions of consumer transactions, including in rental leases.
4. It’s illegal to squelch renters’ right to post reviews about your properties or your service standards. TheConsumer Review Fairness Act (CRFA) protects consumers’ right to share their honest opinions in any forum, including social media, about a business’s products, services, or conduct, and makes it illegal for companies to use form contracts that prohibit or restrict that right. That’s good news for prospective renters looking for accurate information about particular landlords or property management companies. It’s also a welcome development for members of the rental industry who work hard to treat tenants fairly.
The FTC has taken action against companies that have attempted to prohibit consumers from expressing their opinions. For example, the FTC alleged that in the rental application process, Maryland-basedStaffordshire Property Management included a contract clause forbidding applicants from – among other things – disparaging the company or its employees. The settlement put provisions in place to monitor the company’s compliance with the CRFA. Looking for more about what the law requires? ReadConsumer Review Fairness Act: What Businesses Need to Know.
5. Especially when it comes to tenant background screening reports, conduct a Fair Credit Reporting Act check to make sure your practices comply with the law. In considering a prospective tenant’s rental application or evaluating whether to renew a current tenant’s lease, landlords, property managers, or other housing providers may decide to run a background check using a company that compiles information for that purpose. Those reports are covered by the Fair Credit Reporting Act, which requires businesses to take certain steps at various points in the rental process.
You’ll want to readUsing Consumer Reports: What Landlords Need to Know for compliance guidance, but one key requirement is that if you reject an applicant, increase the rent or deposit, require a co-signer, or take any other adverse action based partly or completely on information in the report, you must give the consumer a notice of that fact, preferably in writing, and include the required information. If you use “investigative reports”– reports based on personal interviews concerning aperson’scharacter, general reputation, personal characteristics, and lifestyle–you have additional requirements under the FCRA, including giving the consumer written notice that you’re requesting an investigative consumer report. If you report information about consumers to a consumer reporting agency (for example, a credit bureau or tenant screening company), you have other obligations under the FCRA and the FCRA’sFurnisher Rule. ReadConsumer Reports: What Information Furnishers Need to Know for advice on the requirements.
And once you’re finished using a report, the FCRA requires you to securely dispose of it and any information you gathered from it.Disposing of Consumer Report Information? Rule Tells How explains how that’s done.
Violations of the FCRA can be costly, as recent actions against companies in the tenant background screening business demonstrate. Consider the FTC and CFPB’s $15 million settlement withTrans Union and subsidiary TransUnion Rental Screening Solutions; a $5.8 million FTC settlement with background report providersTruthFinder and Instant Checkmate; a $4.25 million settlement with tenant background reporting companyAppFolio; and a $3 million settlement with tenant screening companyRealPage.
And consumers, we want to hear about your experiences in the rental market. Tell your story to the FTC.
