Best Practices for Complying with HUD's Guidance on Criminal Background Checks

In the May issue, we discussed HUD’s new guidance on criminal background checks. The new guidelines spell out how HUD will evaluate fair housing complaints in cases where a site refuses to rent or renew a lease based on an individual’s criminal history. The new guidance has brought about many questions concerning whether and when criminal background checks may be used to screen applicants.

At a recent webinar on applicant screening and criminal histories produced by Vendome Real Estate Media, fair housing attorney Kathelene Williams and Linda Richer, vice president for AmRent, Inc., addressed some of these questions and concerns involved in developing a compliant criminal history screening policy.

Williams said that it’s very important for all housing providers to review and consider whether their current criminal screening policy should be revised to avoid a successful challenge in a fair housing case based on its disparate impact on minority applicants. “There are fair housing advocacy agencies that are actively searching for companies with simplistic and generalized criminal history policies to challenge. We don’t want your companies to be those test cases,” she said.

CRIMINAL HISTORY SELECTION CRITERIA BEST PRACTICES

It’s important to note that the guidance provided by HUD applies to all housing providers. The best practices are being recommended, so that any housing provider that uses criminal histories in its applicant screening process will consider disparate impact and review their criteria adjusting as necessary.

Understand Key Terminology

If you review criminal records as part of your application process, being able to clearly understand the disposition of the record is critical in how you evaluate prospects for housing, Richer said. Here are some key terms used in criminal record screening:

Arrest. This word can be confusing or misinterpreted in the context of resident screening. Records of “arrest” refer to when a person is “picked up” or “cuffed” for a criminal event. He or she may be taken into custody (typically to a local police station), but a case has yet to be filed in a court. Richer said that most screening companies don’t include records of arrest in their criminal background service.

Pending case. Once sufficient evidence has been presented, typically the prosecutor will file charges. The charge filed opens a case at the appropriate court and the case remains pending until a final disposition, such as guilty or dismissed, has been rendered. HUD’s new guidelines warn against making housing decisions based on arrests, so it’s important to distinguish between arrests and charges filed (that is, pending cases).

Disposition. Disposition refers to how the case was resolved in the criminal justice system. Any criminal record that isn’t pending would have some type of disposition.

Deferred adjudication. Some states use the term, “deferred adjudication,” which is a criminal record showing conviction status, but the court had “deferred” the conviction to allow the offender to participate in some type of community service program. If completed, the conviction status would be removed; if not, the conviction status would stand.

Conviction. A record of conviction means the case resulted in the offender either pleading guilty or being found guilty.

Look-back period. This refers to the amount of time a company will consider when evaluating criminal histories. You may have different look-back periods, depending on the nature and seriousness of the crime.

Exit from incarceration. The date of exit from incarceration, parole, or release date if the sentence included jail time.

Review Your Criminal Screening Criteria

If you haven’t done so already, you should pull out your resident selection criteria and take a close look at the evaluation standards for applicants with criminal records. Depending on what it says, you may need to make some changes right away. Then review it in detail—and get help from your attorney, resident screening company, and other advisors to ensure that it complies with HUD guidelines. Follow these suggestions to ensure your screening criteria is compliant with the new HUD guidelines:

Remove any ban based on arrests. The first thing to do is to check whether your policy includes any ban based on arrest records, Richer said. HUD’s guidance clearly states that records of arrest should not be used to deny housing or terminate a lease. There may be circumstances where a criminal event has occurred and the arrest record might justify further research into the behavior, but an arrest alone can’t be used to deny housing eligibility.

Include statement of the purpose served by criminal screening. When documenting your resident selection policies, include a statement that the policies serve to reduce risk to your communities and residents. As you review your policies and make adjustments, be prepared to show that your policies are set to improve your communities’ and residents’ safety, and that the policy is substantial, legitimate, and has no discriminatory interest.

Remove blanket/generalized felony bans. Check whether your policy includes any “blanket” exclusions for all convictions or all felonies. Those policies are likely to be challenged by disparate impact claims.

Determine most serious and violent crimes. Replace any generalized felony or conviction bans with only the most serious or violent crimes that accomplish your goal of reducing risk. These may include both felony and misdemeanor crimes as long as consideration has been given to the nature of the crime.

Include look-back periods and exit from incarceration. Keep recidivism rates in mind when setting look-back periods. Look-back periods may be based on the conviction date or the date of exit from incarceration.

Address applicants with multiple unrelated violent and nonviolent felony convictions. A pattern of criminal activity may present a risk to your community (especially if it’s recent), so you may want to consider the number of criminal events within a period of time. The events may be unrelated, but a pattern of crimes may show a propensity toward risky behaviors over a short period of time or within a recent period of time.

Remember the Fair Credit Reporting Act (FCRA). Add language that informs applicants that when criminal records are found, they may have an opportunity to appeal and provide circumstances surrounding the criminal events.

The FCRA is the main compliance law for all screening providers (known as consumer reporting agencies), Richer explained. This federal law provides guidance and obligations for screening providers, users of consumer reports (including owners), and consumers (including housing applicants). Once the criminal records are obtained, screening providers can deliver the information only in accordance with FCRA requirements These include an adverse action requirement in which if you determine that an applicant isn’t suitable for housing, or you decide to offer housing with a conditional offer, based on the consumer report, then an applicant is directed to the screening company to find out what information was delivered to the owner and informs the applicant that he or she may dispute any inaccurate or non-updated information.

As you review your policies and make adjustments, keep in the back of your mind the goal you have: to demonstrate that your policies are set to improve your site’s and resident’s safety, and that the policy is substantial, legitimate, and has no discriminatory interests, Richer says. You’ll also want to consider if there’s any less discriminatory practice that could achieve the same goal.

And don’t forget, your policies may come under scrutiny from testers, she warned. Take the time to train your staff properly, and for them to properly communicate your policy regarding criminal records. You want to be sure your policy isn’t being communicated in an abbreviated fashion, and that your staffers aren’t discouraging applicants with criminal histories from applying to your sites.

Appeals of Rejections/Individualized Assessments

In addition to developing a complex policy that includes a graduated tier of look-back periods that relate to the seriousness of the crimes, Williams said that another way to defend your criminal history policy is to include in the policy a description of an applicant’s right to appeal a rejection.

Each rejection should inform the applicant that she has a right to obtain a copy of the criminal record on which the rejection is based. If you use a third-party screening company, these records should be provided by your screening company.

Decide who in your company will conduct these appeals, Williams suggested. It often proves useful to assign appeals to the same person or persons so they can develop some expertise in how to conduct these hearings, including the factors that prove to be the strongest to indicate a rejection should be maintained or reversed. 

Williams often uses the term “individualized assessment” when reviewing whether an applicant is able to explain mitigating circumstances that may change the original determination to reject an application due to a criminal record. There are a number of factors that can be considered during the appeal, including:

• The seriousness of the criminal offense;
• The relationship between the criminal offense and the safety and security of residents, staff, or property;
• The length of time since the offense, with particular weight being given to significant periods of good behavior;
• The age of the household member at the time of the offense;
• The number and nature of any other criminal convictions; and
• Evidence of rehabilitation.

If you’re holding an apartment, this process obviously needs to be completed as soon as possible, so it’s a good idea to put time limits on all aspects of an appeal, Williams said.

HUD hasn’t indicated a defined time frame, so Richer said it will depend on your housing availability and the length of the waiting list. In some cases, it may make sense to hold the apartment for a few days. If the time period expires, the apartment becomes available to another qualified applicant. You could set a reasonable time frame for the applicant to provide the necessary information for your appeal and provide him with the “next available” apartment in the event that the initial time frame expired.

During the presentation, Williams was asked whether this process was taking the housing industry back to a subjective review of the applicant. Those concerns were legitimate, she said. The federal government is asking housing providers to consider whether their criminal history policies reflect a genuine concern for safety or are merely based on generalized stereotypes of the dangers posed by ex-offenders.

While the country works to address difficult problems with the criminal justice system, Williams said that housing providers are tasked to treat applicants with criminal records somewhat similarly to residents who request reasonable accommodations. As you know, these are decided on a case-by-case basis and companies are developing employees with expertise to make these decisions. Due to the seriousness of this issue, Williams suggested that housing providers devote a similar commitment to administering criminal history screening policies and give applicants an opportunity to explain their individual situations.

Insider Sources

Linda Richer: Vice President, AmRent, Inc., www.Amrent.com.

Kathelene Williams, Esq.: The Law Firm of Williams & Edelstein, P.C., www.fairhouse.net.