Can I provide a tenant’s credit report to my landlord-client?

QUESTION:  I am a property manager. I recently had to evict a tenant based on his failure to pay rent. After the case was over, my property owner client asked me to send him the credit report that my firm ordered when we processed the tenant’s lease application. Am I obligated to share that credit report with my client? If not, am I permitted to share that report with my client.

ANSWER:  For the reasons discussed below, the answers to your questions are no and yes. First, it is helpful to summarize some of the laws that govern the proper handling of consumer credit information.

Obviously, screening prospective tenants is one of the principal duties of property managers. As part of the screening process, it has become common practice for property managers to verify a prospective tenant’s ability to pay rent by obtaining a credit report. Businesses that assemble credit reports for other businesses are known as Credit Reporting Agencies, or CRAs. The Fair Credit Reporting Act (“FCRA”) is a federal statute passed in 1970 that was designed to protect the accuracy and the privacy of consumer information supplied by CRAs.

A second statute dealing with credit reports is North Carolina’s Identity Theft Protection Act (“ITPA”). This statute requires for-profit businesses to take reasonable steps, (i.e. to implement policies and procedures) to dispose of certain personal information about consumers. In 2005, the Federal Trade Commission issued a “Disposal Rule” which similarly requires proper disposal of information derived from consumer credit reports.

Turning back to your questions, the FCRA specifies that businesses must have a “permissible purpose” to see a consumer’s credit report. One such purpose is a “business transaction initiated by the consumer”. A lease application is such a transaction. If a property manager obtains a credit report while acting on behalf of a landlord, both the landlord and the property manager are permitted users of the report under the FRCA.

Although your landlord client is permitted to see a tenant’s credit report, you may have no obligation to provide that report. Since July 2015, NCAR’s Exclusive Property Management Agreement for long-term rental property (Form 401) has included a provision covering the subject of “tenant information”. Paragraph 16 of Form 401 notes that there are state and federal laws that regulate the maintenance and disposal of certain personal information of consumers. Paragraph 16 then states: “Owner agrees that Agent shall not be required to disclose any such information to Owner about a tenant or prospective tenant.”