As a plugged-in reader correctly surmised yesterday, and another correctly handles, it’s against the law for a landlord or broker to keep an application fee for an apartment in San Francisco without using said fee to run a credit check and actually process the application.
In other words, if you’re one of the anecdotal 249 applicants who paid a $40 application fee but failed to secure that $3,500 loft in the Mission, or any other applicant who paid an application fee but failed to land the apartment, you have the right to demand a copy of your credit check and an accounting for how the remainder of your application fee dollars were spent, and if they weren’t, the right to demand a refund.
As an aside, if you receive a copy of your requested credit check and realize it was run after the apartment was already rented, let us know.
An Uptick In Application Fees And Frustrations In San Francisco [SocketSite]

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Comments from “Plugged-In” Readers

  1. Posted by eddy

    I’d be curious to see the laws / regs defining the handling of this fee; and the form issued by the landlord in this instance. Seems a highly grey area as I doubt if there are rules preventing landlords from charging an application fee. Stating that you are using that fee for something specific and then not doing that this is a different story. The source article even admits:
    Janan New, director of the San Francisco Apartment Association, a group representing landlords, said landlords were allowed to charge fees to cover processing costs and for credit and background checks.
    So it’s not clear that you can ask for a full refund.
    The practice I’ve long felt was interesting here in the city is how the Presidio / Fort Mason run an auction to set new lease prices at “market rates”. I’m not sure there is a fee there for applying or not (don’t think so), but the whole process seems odd to me.
    Hopefully someone with first hand experience can report back on if they were successful in obtaining a refund for their applications fee(s).

  2. Posted by tc_sf

    Unless there’s a landlord exception that I’m unaware of the Fair Credit Reporting Act (FCRA) would seem to require you get notification and a copy of the report in most cases. Since this is a federal law it would probably supersede any SF laws and any exemption would probably need to be federal. Many checks other then big-3 “credit” bureau checks count as credit reports under FCRA. Of course this wouldn’t apply if no report was actually run.
    Annedotallly, some people ask for copies of their report and get some story such as “Our data provider won’t let us give that out”. Which I don’t believe is allowed under FCRA.

  3. Posted by R

    Damn, there goes my moneymaking scam.

  4. Posted by A.T.

    There’s some fine journalism for you! Charging application fees is fine, but you can only do so if, and to the extent, you use the fee to cover actual out-of-pocket expenses in screening the tenant (Civil Code § 1950.6, if you’re interested). If that’s what was going on in the article, that’s a big nothing and not even newsworthy.
    So to make it juicier, the article suggests this landlord (and others) use application fees as a cash cow, which is illegal, but the writer says nothing about that or even delves into whether that was going on at all.

  5. Posted by Rillion

    “there goes my moneymaking scam”
    Hold on a sec, don’t give up so easy, you can hire my new landlord consulting business to review your applications for you and advise you on which tenants to select, we will provide you with an invoice to document your costs if anyone requests an accounting for the application fee.
    Now you might ask what’s in it for you, but before you do, I just found this envelope on the ground, did you by chance drop it?

  6. Posted by R

    Brilliant Rillion!
    We just need to figure out something where half the money filters back to me through some psuedo-legitimate-sounding business. The found envelope only goes so far.

  7. Posted by The Milkshake of Despair

    Just make the application screening business a wholly owned subsidiary of the leasing brokerage. The application screening company charges a blanket $40 per application whether or not a credit check report was requested. Their costs “average out” to $40 per ap even though some are just tossed in the bin (real cost: $0) and others go through thorough screening: credit checks, calls to employers and past landlords, etc.
    A defense against such scams would be to require that the leasing agency only extract fees for a small subset (five or less) of finalists at a time. Charging a fee to hundreds of applicants is meaningless and bogus. Anyone who’s reviewed a stack of applications (or resumes for that matter) knows how quickly you can sift through them and pick out the best candidates.

  8. Posted by anon$random

    funny that between the article in bay citizen (a total rag), and all the posts here. there is basically ZERO corroborated evidence that anyone is actually making profits from application fees. the article itself is a weak piece of journalism that makes the leap from there being 240 applicants to every single one of them paying a fee…where’s the evidence that this happens?

  9. Posted by Rome is Burning

    I had high hopes that the Bay Citizen would be a quality operation. Instead, it looks like they are positioning themselves to inherit the Bay Guardian’s following when those 1960’s geezers croak.

  10. Posted by Kathleen

    I have an account with a credit reporting company. Our contract prohibits us from giving the applicants a copy of the credit report. I am always happy to show it and discuss the details with anyone who applies for a property.

  11. Posted by tc_sf

    “ur contract prohibits us from giving the applicants a copy of the credit report”
    FCRA does appear to cover landlords. You give them the adverce action notice, that lets them get the report from the agency. See link
    http://business.ftc.gov/documents/bus49-using-consumer-reports-what-landlords-need-know

  12. Posted by A.T.

    Kathleen, if there is such a provision in your contract, it is almost certainly unlawful and unenforceable. The state statute I cited above provides: “If an application screening fee has been paid by the applicant and if requested by the applicant, the landlord or his or her agent shall provide a copy of the consumer credit report to the applicant who is the subject of that report.”

  13. Posted by Renee Gonsalves

    This is shameful. Has anyone listed the name or property? I hope 249 people ask this crook for a copy of their credit report or their money back. As a small property owner, this makes us all look bad. I recently rented my 1-bedroom condo in Bernal Heights, and stopped at the first 12 qualified applicants. The top applicants all came with their credit reports in hand. NO APPLICATION Fees were collected – not necessary. I was happy to receive top rent from a very nice, qualified and appreciative couple. Renters, please ask the landlord directly how they plan to select their renter and where you are on their list prior to handing over $40.There are some great rental agents out there who can help you!

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