Follow Us! 

Policy Perspectives: Rent Arrears, Credit Reporting, and Tenant Screening

The following guest essay is part of PHADA’s Policy Perspectives series. The positions and views expressed are those of the author and do not necessarily represent the position of PHADA.

David Weber, PHADA Policy Analyst


Last week a member of the Campaign for Housing and Community Development Funding (CHCDF, of which PHADA is a member) circulated a request to sign on to a letter to the Consumer Financial Protection Bureau requesting that they prohibit debt collectors from reporting rent arrears debt to the nationwide consumer credit reporting agencies i.e. Equifax, Experian, and TransUnion. It immediately brought to mind a February Urban Institute webinar on Credit Reporting Financial Inclusion: Lessons Learned and What’s Next for Innovations in Alternative Credit Data | Urban Institute.

The point of both the letter, and the webinar, is that existing practices relating to credit reporting and both borrowing and tenant screening are skewed in ways that have a disparate income on low-income minority households. Participants in the Urban Institute discussion largely supported a significant overhaul of what data is collected and used in issuing credit scores, and representatives of the credit agencies discussed how using alternative measures actually produced more reliable predictability than traditional methods. Other alternative approaches, such as an opt-in to positive reporting of rental payments, was studied by PERC (Policy and Economic Research Council) and was the subject of a meeting with Secretary Carson in which PHADA participated. Working with state and local court systems to reform what data is collected and reported and strengthening requirements for reporting when past due rents or rent arrears have been paid or dismissed were also highlighted.

The sign-on letter to the CFPB from the National Consumer Law Center focuses on one very small, but potentially impactful, aspect of this larger system. Landlords don’t generally report to the credit bureaus directly, but when they refer a tenant or former tenant debt to a collection agency, that collection agency generally does report the debt to the credit bureaus. With millions of households who have gotten behind on rent during the pandemic, many will have significant rental debt as we emerge from the pandemic and eviction moratoria end. When those debts are reported to the credit reporting agencies, the impact will follow those tenants for years and will inhibit their ability to find stable housing or secure any credit (such as a mortgage or credit card), even if they have regained stable and adequate income. The letter writers believe that preventing these future negative impacts can be achieved by preventing reporting of rental arrears incurred during the pandemic or requiring notation that the arrears are a result of COVID-19 impacts or tenant is (or was) protected by an eviction moratorium.

This is certainly not a core issue for PHADA and is even outside of the core policy issues PHAs must face. It is also a way that PHAs may contribute to, or at least participate in, a system that creates disparate impacts for minority Americans. After all, many PHAs do use collection agencies, in part or in full to be able to demonstrate to HUD and Congress that every reasonable effort has been made to collect the back rent. Many PHAs also use the same tools as most landlords in tenant selection, reviewing past rental payment history even if not using full credit reports, as one item in their screening of potential tenants. The practices of the selected collection agency, and how well tenant screeners can effectively look past the reported credit and/or rental payment history to complete an individualized assessment of suitability for tenancy, will impact how much PHAs participate in this systemically discriminatory system.

PHAs may want to consider these issues when procuring collection agencies and when revising tenant screening policies and procedures. HUD and other regulators may want to revise rules and guidance regarding what constitutes “best efforts” to collect rent arrears before such amounts may be written off as uncollectable.

Join PHADA Today. Link to online application.