Recent amendments to the Fair Credit Reporting Act (“Act”) has caused the Federal Reserve Board and the Federal Trade Commission to amend their rules (“Rules”) to now require entities who take an “adverse action” based on a credit score in a transaction with a consumer (such as requiring a larger security deposit) to now disclose this fact to the consumer. These amendments reflect the new content requirements added by section 1100F of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Rules only require disclosure if the action is based on a “consumer report,” as defined within the Act. While “Adverse Action Notice” requirement in the Act has existed for creditors since 1996, the Rules now require notice if an action based on the consumer’s credit score results in less favorable terms to the consumer than the most favorable terms available to a substantial proportion of consumers. For a landlord, an adverse action would include the following: denying the consumer’s application; requiring a co-signer to a lease; requiring a higher security deposit; or requiring the payment of an increased rent amount.

The Rules only apply if the “adverse action” is taken pursuant to the consumer’s credit score. The notice that the landlord must provide to the consumer will need to include the following:

• The credit score that the landlord used in making the decision and the entity that created the credit report;
• The range of possible scores within the model used;
• All of the key factors that adversely affected the score, not to exceed four factors; however, if one of the factors is the number of credit inquiries made, then the list can include up to five factors; and;
• The date of the credit report.