On August 12, the National Consumer Law Center (NCLC), a prominent consumer advocacy group, filed a petition with the CFPB to open legislation under the Equal Credit Opportunity Act (ECOA) to expand the definition of “credit” to include residential and rental leases and “creditors” to include landlords. While recognizing that landlords are already prohibited from discriminating against prospective tenants under the federal Fair Housing Act, the petition seeks to secure two additional protections.
First, the NCLC wants to expand the ECOA’s adverse action notice requirements to rental housing. Currently, prospective tenants receive an adverse action notice under the Fair Credit Reporting Act (FCRA) when a consumer report factors into the decision to deny them an apartment. However, the FCRA does not provide specific reasons for the denial; for example, it would not detail that the tenant was denied because of a low credit score or criminal record. However, ECOA’s adverse action notice requirements would require lenders to provide reasons for denying loan applications. The petition argues that applying these requirements to rental housing would address the “troubling lack of transparency” in the information landlords use when evaluating prospective tenants, which often comes from third-party screening services.
Second, by expanding ECOA’s definition, the NCLC claims that the CFPB’s proposed rule banning the use of medical debt (previously discussed here) would apply to tenant screening companies as well. The petition argues that just as medical debt is a poor indicator of loan repayment, it is also an unreliable measure of tenant reliability and should not be a factor in leasing decisions. By classifying leases as loans, the CFPB could prevent landlords from factoring a prospective tenant’s medical debt into the leasing decision.
Put into practice: Expanding the definition of credit has become a recurring theme for the CFPB. The bureau has already proposed a rule characterizing earned wage access products and bank overdraft products as loans, and has included merchant cash advance products in its 1071 rule. Recently, it has become embroiled in litigation with a rent-to-own company on the grounds that such products also qualify as loans (see our discussion here). The NCLC appears to be pushing the CFPB to expand its reach.
