San Diego: Landlords and Credit Checks

July 5, 2002

San Diego, California has many home owners and also has many tenants and landlords. As San Diego has over 1 million residents, many of them are renters. When an apartment or home is rented in San Diego, California, the landlords must abide by both federal and state law.

Landlords are free to use credit reports in evaluating prospective tenants, but they must follow requirements set out in the Fair Credit Reporting Act (FCRA). A new guidance has been issued that describes how the FCRA applies to landlords and what the consequences are for noncompliance. The guidance focuses especially on a landlord's obligation to provide an applicant with an "adverse action notice" when adverse action is taken based on information in the applicant's "consumer report."

A consumer report is a compilation of information about a person's credit characteristics, character, reputation, lifestyle, and rental history. A report is covered by the FCRA only if it was prepared by a consumer reporting agency (CRA). The major credit bureaus are CRAs, as are many tenant-screening services and reference-checking services. If a landlord uses its own employees to verify personal, employment, and previous landlord references, the FCRA does not apply.

The most obvious adverse action that will trigger the notice requirement is outright denial of a rental application. Something short of that can also constitute adverse action so long as it is prompted by information in a consumer report. For example, a notice must be given to applicants who are required by the landlord to: have a co-signer on the lease; pay a deposit not required for other applicants, or an unusually large deposit; or pay rent that is higher than for another applicant.

The essential contents of an adverse action notice are established in the FCRA. The notice must contain the name, address, and telephone number for the CRA that supplied the report, a statement that the CRA did not make the rental decision and that it cannot give the specific reasons for that decision, and notification that the consumer has rights to a free report and to dispute the accuracy or completeness of information in the report. Even landlords for whom a consumer report played only a minor role in the decision to take an adverse action must give the notice to the applicant. A written notice is the best proof of compliance.

Landlords are well-advised to stay in compliance with all FCRA requirements, including adverse action notices, as the consequences for noncompliance can be significant. For lack of required notices, a landlord can be sued by individuals in federal court and made to pay compensatory damages, punitive damages if the violations are deliberate, and attorney's fees. Federal or state agencies can also sue landlords and get civil penalties. An isolated and inadvertent failure to send a notice, however, will not result in landlord liability if the landlord has reasonable procedures in place to assure compliance with the FCRA.

Please feel free to contact our law firm of Law Office of Scott C. Soady, A Professional Corporation with your legal question or feel free to e mail us. We practice in estate planning and family law and would be pleased to assist with your legal matter.


San Diego New Business: Empoyer Identification Numbers

July 1, 2002

In San Diego, California, a new business must get a nine-digit employer identification number (EIN) from the Internal Revenue Service if it either pays wages to one or more employees or files pension or excise tax returns. An EIN is like a Social Security number for a business. It is used when filing a federal tax return, as well as for correspondence with the IRS or the Social Security Administration.

In San Diego, for your convenience, we are attaching links to the Internal Revenue Service and Social Security Administration. You can also download the appropriate forms from these websites.

IRS Form SS-4 is an application for an EIN, with information on how to apply by mail or by telephone. The IRS now has a toll-free telephone number for getting an EIN: (800-829-4933).

Our law firm of Law Office of Scott C. Soady, A Professional Corporation is committed to giving personal service at an affordable price. We believe that by using our education, training and experience, we can help clients avoid problems with the non compliance of laws by advising as to compliance at the intitial formation of business entities. Please feel free to contact us by telephone or by e mail.