January 17th, 2014

What Are the Rules For Ontario Landlords to Do a Tenant Credit Check the Right Way?

(And What Happens If You Don’t? Because Tenants Are Complaining So Be Careful)

Landlords know the importance of renting to good tenants.

We have written about this before to warn Ontario landlords.

There are a lot of good tenants all over the province and they want to rent from you.

These tenants pay the rent on time and respect you and your rental property.

Landlords big and small are seeking these tenants who follow the rules and cooperate with their landlords for a win-win situation.

It’s especially important since the Ontario Rent Increase Guideline is only 0.8% as a recent Toronto Sun report explained.

Bad Tenants

There is also a large group of bad tenants out there.

Whether you are an Ottawa landlord, a Toronto landlord, own properties a bit north and are a Barrie landlord or anywhere else in the province you have surely heard about the damage bad tenants can do to landlords in Ontario.

These bad tenants know how to manipulate the system and will end up costing you thousands of dollars in losses and months of stress and frustration.

A Supreme Court Justice even said there are too many opportunities for bad tenants to take advantage of good landlords in Ontario. You can read what the judge said at the excellent column by our friend Bob Aaron at the Toronto Star.

Tenant Credit Checks

The Ontario Landlords Association has introduced tenant credit checks and their importance in a professional tenant screening system to thousands of landlords across the province.

We have excellent partners such as Equifax and GARDA.

They are authorized to conduct tenant credit checks and look into your potential tenant’s financial history.

These companies provide tools for landlords to succeed with their rental businesses by helping you rent to good tenants.

Are Some Landlords Doing It Wrong?

Yes, some are.

And you need to be careful.

We have received lots of emails from tenants who are claiming some landlords are obtaining their credit data in a fraudulent manner.

The tenants say their privacy rights have been stomped on by small landlords.

There have also been posts about this from tenants on the Ontario Landlords Forum.

For example a tenant wrote:

I’m looking for some advice on how to deal with a serious situation.

I take great care of my credit profile and my privacy. This year I was forced to look to rent a property near my work. After finding a property I was interested in the landlord said they would do an employment check, reference check and a credit check on me to see if I was qualified. I agreed they could.

Fast forward and I recently checked my credit report. At the time of my application there is now a ‘credit hit’ from a mortgage and real estate agent on my credit score. I did not apply for a mortgage or to buy a house! It is the only ‘credit hit’ for that time period.

I never agreed for a credit check from a mortgage or real estate agent. I never applied for a mortgage or to purchase a house. This will lead future creditors/landlords/anyone to think I wanted to buy my own place and applied for a mortgage. It will also lead to people mistakenly thinking I was refused a mortgage and failed to buy a place of my own.

I only authorized the landlord to do a credit check for the purpose of renting. I would like to know my options because this is a breach of my privacy rights.

With so many emails and an increasing number of tenant posts passionately explaining their serious concerns we decided to contact our partner Equifax Canada.

It seems some landlords are using friends or relatives who are Realtors or mortgage agents or insurance agents to get credit checks done on prospective tenants.

Our Interview With Equifax Canada

We contacted our partner Equifax Canada and spoke with them about the ‘right way’ for landlords to conduct tenant credit checks.

Here are our questions and the answers that follow:

1. Can I Call my Relative or Friend To Do the Credit Check For My Potential Tenant?

If the landlord uses a mortgage agent, Realtor, etc. to access potential tenants credit data for them, and the tenant didn’t agree and these tenants contact Equifax what will happen?

What are the penalties that could occur?

ANSWER FROM EQUIFAX

No.

Given the nature of the existing credit reporting/privacy legislation and the terms of use (agreement) by the Equifax member, the consumer can report this type of unacceptable activity to the Ministry of Consumer Services, who will then investigate.

Any inappropriate use or breach of contract could lead to termination of membership with Equifax.

 2. Mortgage Agents, Realtors, Insurance Agents, Car Dealerships

Several landlords say they have used friends who are mortgage agents, Realtors, etc. for years to access tenant credit data and nothing happened and there is nothing wrong using this method to obtain credit data on potential tenants.

What is the best response to their claims?

ANSWER FROM EQUIFAX

See above and below for more details.

Equifax must disclose the actual entity that received the file.

3. What About Third Parties to Obtain Credit Data?

Some landlords have a waiver on their application form saying they will use a “third party” to obtain credit data on a potential tenant (they don’t say who will do the check, only that it will be a third party).

They then contact a friend who is a mortgage agent, Realtor, insurance broker, someone who works at a car dealership, etc. to do the credit check on the potential tenant for them. 

They wonder if the waiver clause allows them to use a ‘friend’ is okay.

ANSWER FROM EQUIFAX

The service agreement signed by EACH of our members clearly articulates that they will not “share” a credit file with another entity: the credit file is for their exclusive use ONLY.

Any entity that does share is in violation of this agreement.

4. Tenants Complaining About Unauthorized Credit Checks

Some tenants complain they have a ‘credit hit’ on their credit reports from mortgage agents, insurance agents, etc. which they never agreed to (as they only wanted to rent an apartment). 

How can tenants get these unauthorized credit hits off their records?

ANSWER FROM EQUIFAX

Due to privacy legislation, once Equifax delivers a file to a member, we MUST post an inquiry (by law).

As such, we do not remove these inquiries as they are factual and the consumer has a legal right to know their file has been disclosed.

5. What Can Tenants Do?

Some tenants who have credit hits from people they never authorized have asked if they should contact the Ministry of Consumer Services to make formal complaints that their credit data was obtained fraudulently. They would like advice on this.

ANSWER FROM EQUIFAX

Yes, they should contact the Ministry of Consumer Services who will launch an investigation.

They can reach also reach Equifax directly at the following telephone numbers to lodge a complaint and we will do an investigation:

English: 1-866-828-5961

French: 1-877-323-2598

Ontario Landlords And Tenant Screening 2014

Let’s work together to make 2014 the most successful year ever for landlords across Ontario.

Tenant screening is an essential part of being a successful landlord.

Make sure you follow the rules and find great tenants for your rental properties.

High quality tenant credit companies such as Equifax and GARDA are waiting to assist you.