The Massive Equifax Breach - Quality, Compliance & the Perfect Storm

There is little doubt that tenant screening is an important part of success in property management.  There is little doubt that tenant screening (a form of consumer reporting) is threatened by federal regulation, state and local legislation and an increasingly bold and well-funded consumer advocacy.

And if that weren’t enough, there are the friendly fire incidents – landlords, managers and tenant screening companies who (often unintentionally) fail to comply with current law or best practices.

Let’s face it.  It’s hard!  There is a considerable and growing body of law (of the legislative AND case law variety) impacting directly or indirectly the tenant screening function.  There is the federal Fair Credit Reporting Act and its offspring in state law.  And, there are related fair housing statutes and the now well-established disparate impact legal theory.

Last, but certainly not least there is the growing risk of a data breach – the compromise of personal identifying information contained in the enormous data stores maintained and sold by the big three national credit bureaus (Equifax, Experian & Transunion).

We’ve known the risk is real.  However, few would have guessed it would reveal itself as it has in the form of the recent Equifax “hack”.  The assumption has been the risk was greatest at the end-user level – that the bureaus themselves had the smarts and resources to defend against a cyber-attack.

Legislators, regulators, consumer reporting agencies and landlords have yet to fully wrap their heads around the implications of this monstrous breach.  There is a great deal we don’t know, such as:

  1. How to positively identify applicants going forward – since it must be assumed that SSN, DOB & address can no longer be relied upon for (arguably) the majority of consumers: and
  2. Whether or not, current best practices will suffice given the extent of the breach??

There is still a lot of uncertainty.  The problem is big enough that a thorough post mortem and a specific and comprehensive response is some time away.  So what do we do in the mean time?

When times are tough and we are overwhelmed by the complexity and scope of a problem the first step is to make sure we are compliant with current law, best practices and our own ethical standards. In other words, return to the basics.  It is not enough that we (as landlords) are compliant in this rapidly changing environment.  We must satisfy ourselves that we have hitched our wagon to the right horse – that we are working with a screening company who:

  1. Knows and stays abreast of legal and regulatory trends;
  2. Has demonstrated deep knowledge of consumer reporting and a commitment to taking the high-road – legally and ethically;
  3. Keeps us informed; and
  4. Can be relied upon to read the tea leaves and suggest practices that will keep us out of court while effectively screening prospective residents.


It’s simple, really.  Tenant screening remains a key factor in managing resident profile, which goes to NOI and equity. We can assume the worst – that it is no longer possible (or advisable) to screen prospective residents.  Or we can…

Stay positive.  Work with your screening company to develop a methodology (and criteria) that mitigates the risk of legal and regulatory entanglement AND effectively screen prospective residents.

Case in Point.  City of Seattle limits use of criminal records for tenant screening purposes?  Worrisome but not catastrophic!  Experience tells us, for example, that the majority of those with deniable criminal convictions will not meet our criteria in other areas as well - income, credit standing and most important perhaps, rental history.

Rental history is the most direct measure of the odds an applicant will fulfill the terms of their rental agreement.  It is, therefore, the factor least likely to draw legal fire and easiest to defend.

Rental history (verifications) are without question “old school”.  It is true that some owners & managers will not provide them – yet that remains the minority.  Given limits being placed on use of public records data – and one day (in our view) credit standing – rental history is more important than ever.  Keep doing them.  If you are not doing them, start!

We hope this puts the current environment in perspective.  It is in our judgment, still possible to do a good job screening prospective residents – even in this environment.  The challenge, of course, is cutting through the legal and regulatory fog.  That requires teaming with a screening company who has demonstrated they have the knowledge, resources, creativity, ethics and discipline necessary to keep you informed and out of trouble.

Contact Moco Inc. or® for more information on this other related topics.