On August 12, the National Consumer Law Center (NCLC), a prominent consumer advocacy group, petitioned the CFPB to open rulemaking under the Equal Credit Opportunity Act (ECOA) to expand the definition of “credit” to include housing and apartment rental leases, and “creditors” to include landlords. While acknowledging that landlords are already banned from discriminating against prospective tenants under the federal Fair Housing Act, the petition aims to secure two additional protections.
First, the NCLC wants to extend ECOA’s adverse action notice requirements to rental housing. Currently, rental applicants receive an adverse action notice under the Fair Credit Reporting Act (FCRA) when a consumer report is involved in the decision to deny them housing. However, FCRA does not provide specific reasons for the denial; for example, it would not detail that the renter was denied because of a low credit score or criminal record. However, ECOA’s adverse action notification requirements, lenders would be required to specify reasons for denying credit applications. The petition argues that applying these requirements to rental housing would address the “troubling lack of transparency” in the information landlords use, often from third-party screening services, when evaluating potential tenants.
Second, by expanding the definition of ECOA, the NCLC asserts that the CFPB’s proposed rule to ban the use of medical debt (previously discussed here) would also apply to tenant screening companies. The petition argues that just as medical debt is a poor predictor of loan repayment, it is also an unreliable measure of tenant reliability and should not be a factor in leasing decisions. By classifying rental leases as credit, the CFPB would be empowered to prevent landlords from factoring a potential tenant’s medical debt into the leasing decision.
Putting It Into Practice: The expanding the definition of credit has become a recurring theme for this CFPB. The Bureau has already proposed rulemaking characterizing earned wage access products as well as bank overdraft products as credit, and included merchant cash advance products in its 1071 rulemaking. More recently, it has become entangled in litigation against a lease-to-own company on the grounds that such products are also considered credit (see our discussion here). The NCLC seems to be pushing the CFPB to expand its reach.
