Existing law requires a landlord of an assisted housing development, as defined, to offer tenants obligated on the lease of units in the development the option of having their rental payments reported to at least one consumer reporting agency through a written election of rent reporting, as specified. Existing law authorizes a landlord to charge a tenant that elects to have rent reported the lesser of $10 per month or the actual cost to the landlord to provide the service, as specified. Existing law requires the Department of Financial Protection and Innovation to select an independent evaluator and requires the evaluator to report annually on the impact of these provisions, as specified. Existing law repeals these provisions on January 1, 2025.

This bill would permit a landlord, upon the agreement of the tenant, to provide the offer of rent reporting to the tenant by first-class United States mail or email. The bill would delete the provisions described above that require the selection of an independent evaluator to report on the impact of rental payment reporting. The bill would also delete the January 1, 2025, repeal date thereby extending the duration of these provisions indefinitely.

Existing law requires a landlord of an assisted housing development, as defined, to offer tenants obligated on the lease of units in the development the option of having their rental payments reported to at least one consumer reporting agency through a written election of rent reporting, as specified. Existing law authorizes a landlord to charge a tenant that elects to have rent reported the lesser of $10 per month or the actual cost to the landlord to provide the service, as specified. Existing law requires the Department of Financial Protection and Innovation to select an independent evaluator and requires the evaluator to report annually on the impact of these provisions, as specified. Existing law repeals these provisions on January 1, 2025.

This bill would permit a landlord, upon the agreement of the tenant, to provide the offer of rent reporting to the tenant by first-class United States mail or email. The bill would delete the provisions described above that require the selection of an independent evaluator to report on the impact of rental payment reporting. The bill would also delete the January 1, 2025, repeal date thereby extending the duration of these provisions indefinitely.

Existing law requires a landlord of an assisted housing development, as defined, to offer tenants obligated on the lease of units in the development the option of having their rental payments reported to at least one consumer reporting agency through a written election of rent reporting, as specified. Existing law authorizes a landlord to charge a tenant that elects to have rent reported the lesser of $10 per month or the actual cost to the landlord to provide the service, as specified. Existing law requires the Department of Financial Protection and Innovation to select an independent evaluator and requires the evaluator to report annually on the impact of these provisions, as specified. Existing law repeals these provisions on January 1, 2025.

This bill would permit a landlord, upon the agreement of the tenant, to provide the offer of rent reporting to the tenant by first-class United States mail or email. The bill would delete the provisions described above that require the selection of an independent evaluator to report on the impact of rental payment reporting. The bill would also delete the January 1, 2025, repeal date thereby extending the duration of these provision indefinitely.

Existing law requires a landlord of an assisted housing development, as defined, to offer tenants obligated on the lease of units in the development the option of having their rental payments reported to at least one consumer reporting agency through a written election of rent reporting, as specified. Existing law authorizes a landlord to charge a tenant that elects to have rent reported the lesser of $10 per month or the actual cost to the landlord to provide the service, as specified. Existing law requires the Department of Financial Protection and Innovation to select an independent evaluator and requires the evaluator to report annually on the impact of these provisions, as specified. Existing law repeals these provisions on January 1, 2025.

This bill would delete the January 1, 2025, repeal date thereby extending the duration of these provision indefinitely.

SENATE THIRD READING

STR Bill Id:SB 924

Author:(Bradford)

As Amended Ver:April 16, 2024

Majority vote

SUMMARY

Removes the July 1, 2025 sunset from the provisions of the Civil Code that require any landlord of an assisted housing development, as defined, to offer each tenant obligated on a lease the option of having the tenant's rental payment information reported to at least one nationwide consumer reporting agency.

Major Provisions

COMMENTS

Many Californians who do not possess a robust credit history do have a history of paying rent on time. But that information does not show up on their credit reports and does not help their credit scores. To help alleviate this problem, SB 1157 (Bradford), Chapter 204, Statutes of 2020 provided low-income tenants of assisted housing developments the opportunity to have their rental payment information reported to consumer reporting agencies, adding to their credit history. SB 1157 required landlords of these developments, with the exception of some landlords of developments with 15 or fewer units, to offer tenants the option of having their rental payment information provided to consumer reporting agencies. That measure proved extremely successful: A 2023 report by Esusu, a fintech company that provides rent reporting, found 3,000 new credit scores in California for previously credit-invisible renters in the aftermath of SB 1157's adoption. (Rent Reporting Legislation Leads to 3,000 New Credit Scores Established in California (Aug. 2023), available at https://www.globenewswire.com/en/news-release/2023/08/23/2730640/0/en/Rent-Reporting-Legislation-Leads-to-3-000-New-Credit-Scores-Established-in-California.html.)

This bill makes permanent a requirement that has demonstrated significant success. By removing the July 1, 2025 sunset, even more low-income Californians will have an opportunity to improve their credit scores by timely paying rent.

The impact of rent reporting on building credit. Several studies and pilot programs have shown that reporting the full rental history of low-income tenants to the major consumer reporting agencies will have a positive impact on most of those tenants' credit scorability and credit scores. For example, a pilot of 1,255 tenants across eight affordable housing providers nationwide, including the East Bay Asian Local Development Corporation in California, resulted in dramatic findings: all residents participating in the pilot who initially had no credit score had either a high nonprime or prime score with the inclusion of their rental payment history, and a large majority (79%) of participants experienced an increase in credit score, with an average increase of 23 points. (Chenven and Schulte, The Power of Rent Reporting Pilot: A Credit Building Strategy (2015) Credit Builders Alliance and Citi Foundation https://creditbuildersalliance.org/wp-content/uploads/2019/06/CBA-Power-of-Rent-Reporting-Pilot-White-Paper.pdf, at p. 5.) General studies on the impact of rent payment reporting on credit conducted by the credit reporting agencies Experian and TransUnion showed similarly positive results. (See Credit for Renting (2014) Experian http://www.experian.com/assets/rentbureau/white-papers/experian-rentbureau-credit-for-rent-analysis.pdf (analysis of data on 20,000 subsidized housing residents "demonstrates the impact of positive rent reporting on credit file thickness, risk segment migration and credit scores for subsidized housing residents" at p. 6); TransUnion Analysis Finds Reporting of Rental Payments Could Benefit Renters in Just One Month (June 19, 2014) TransUnion https://newsroom.transunion.com/transunion-analysis-finds-reporting-of-rental-payments-could-benefit-renters-in-just-one-month ("reporting of rental payment information to the credit bureaus in a manner similar to other financial obligations could have a positive effect for the majority of subprime consumers' credit").)

The impact is not limited to increasing scores: key findings from a study commissioned by the U.S. Department of Housing and Urban Development concluded that rent reporting tended to "dramatically reduce unscorability." The study found that the "rate of unscorability fell from 49 percent to 7 percent in one model and fell from 11 percent to 0 percent in the other model with the addition of full-file rental payment data." (Turner and Walker, Potential Impacts of Credit Reporting on Public Housing Rental Payment Data (Oct. 2019) Policy and Economic Research Council as commissioned by the U.S. Department of Housing and Urban Development https://www.huduser.gov/portal/sites/default/files/pdf/Potential-Impacts-of-Credit-Reporting.pdf, at p. 8.)

According to the Author

SB 924 will remove the July 1, 2025 sunset date of SB 1157 (Bradford, 2020) which requires any landlord of an assisted housing development to offer tenants the option of having their rental payments reported to a consumer reporting agency, effectively making this a permanent program. According to the Census' American Community Survey, just over 44% of Californians rent their housing. Yet, at the present time, although failure to pay one's rent has a negative impact on one's credit, most Californians who make on-time rent payments fail to receive any benefit to their credit scores for making those on-time payments. Several studies have investigated whether rent reporting to major credit bureaus yields positive outcomes for renters, and results are consistent: rent reporting helps individuals who lack credit scores establish those scores and helps individuals with nonprime credit improve their credit scores. This bill builds on the success of SB 1157 and continues to provide a tool for low-income renters in California to improve their credit scores.

Arguments in Support

The California Housing Partnership supports this measure:

Building and maintaining a good credit score is essential in today's economy. It affects what an individual can buy, their access to financial tools, their ability to borrow money, and their ability to find affordable housing. Due to systemic issues, Californians with poor credit scores tend to be younger, low-income, and persons of color. For many, establishing a credit history can be challenging because enrolling in services or obtaining loans that would establish a credit history often requires having a credit history. SB 924 removes the sunset in current law that requires landlords of subsidized housing developments to offer their tenants the option to have their rental history reported to credit reporting agencies. This allows residents to build their credit through their rent payments.

SB 924 ensures that those left out of today's economy can build a credit history to fully participate. We thank Senator Bradford for authoring this important bill, and for these reasons, the California Housing Partnership strongly supports SB 924.

Arguments in Opposition

No opposition on file.

FISCAL COMMENTS

According to the Assembly Appropriations analysis, eliminating the sunset on the requirement that qualifying landlords offer their tenants rent reporting has no fiscal impact on the state. Eliminating DFPI's annual report results in a minor reduction in cost pressures to the General Fund. Under existing law, DFPI must to complete the annual report upon appropriation by the Legislature. According to DFPI, no appropriation has been made for this purpose, and the department has not incurred any related costs to date.

VOTES

SENATE FLOOR: 34-3-3

YES: Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Padilla, Portantino, Roth, Rubio, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

NO: Niello, Ochoa Bogh, Seyarto

ABS, ABST OR NV: Allen, Dahle, Nguyen

ASM JUDICIARY: 8-0-4

YES: Kalra, Lee, Bryan, Connolly, Haney, Maienschein, McKinnor, Pacheco

ABS, ABST OR NV: Dixon, Joe Patterson, Reyes, Sanchez

ASM APPROPRIATIONS: 10-0-5

YES: Wicks, Arambula, Bryan, Calderon, Berman, Mike Fong, Haney, Hart, Pellerin, Aguiar-Curry

ABS, ABST OR NV: Sanchez, Dixon, Grayson, Jim Patterson, Ta

UPDATED

VERSION: April 16, 2024

CONSULTANT: Shiran Zohar / JUD. / (916) 319-2334 FN: 0003547

Date of Hearing: June 19, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

SBPCA Bill Id:SB 924

Author:(Bradford) – As Amended Ver:April 16, 2024

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill eliminates the sunset for a statute that requires a landlord of an assisted housing development to offer to report each tenant’s rent payment information to consumer reporting agencies. The bill also eliminates the existing requirement that the Department of Financial Protection and Innovation (DFPI) annually report on qualifying landlords’ reporting of tenants’ rental payments.

FISCAL EFFECT:

Eliminating the sunset on the requirement that qualifying landlords offer their tenants rent reporting has no fiscal impact on the state. Eliminating DFPI’s annual report results in a minor reduction in cost pressures to the General Fund. Under existing law, DFPI must to complete the annual report upon appropriation by the Legislature. According to DFPI, no appropriation has been made for this purpose, and the department has not incurred any related costs to date.

COMMENTS:

1. Purpose. According to the author:

According to the Census’ American Community Survey, just over 44% of Californians rent their housing. Yet, at the present time, although failure to pay one’s rent has a negative impact on one’s credit, most Californians who make on-time rent payments fail to receive any benefit to their credit scores for making those on-time payments. Several studies have investigated whether rent reporting to major credit bureaus yields positive outcomes for renters, and results are consistent: rent reporting helps individuals who lack credit scores establish those scores and helps individuals with nonprime credit improve their credit scores.

1. Background. Many low-income Californians have no credit history or insufficient credit history to generate a credit score, which can limit their ability to access financial services and participate in common transactions like renting an apartment, getting a credit card, or borrowing money from a bank. A lack of credit history disproportionately affects people of color. In 2020, the Legislature enacted SB 1157, which requires a qualifying landlord of an assisted housing development to offer to report their tenants’ rental payment information to at least one consumer reporting agency. By requiring qualifying landlords to offer to report tenants’ rental payment information to consumer credit agencies, SB 1157 aimed to establish or bolster the credit histories of low-income Californians living in specified government-assisted rental housing developments. According to the analysis of this bill by the Assembly Committee on Judiciary, SB 1157 has already had a demonstrable positive effect on the credit histories of thousands of people in California.

Under existing law, the requirement that qualifying landlords offer to report their tenants’ rental payment information will sunset on July 1, 2025. This bill eliminates the sunset, requiring qualifying landlords to continue offering rent reporting to their tenants indefinitely. This bill also eliminates a requirement that, upon appropriation by the Legislature, DFPI complete an annual report of the impact of rent credit reporting. As noted above, no appropriation has been made for this purpose to date, and DFPI has not incurred any costs related to completing the report.

Analysis Prepared by: Annika Carlson / APPR. / (916) 319-2081

Date of Hearing: June 4, 2024

ASSEMBLY COMMITTEE ON JUDICIARY

Ash Kalra, Chair

SBPCA Bill Id:SB 924

Author:(Bradford) – As Amended Ver:April 16, 2024

SENATE VOTE: 34-3

SUBJECT: TENANCY: CREDIT REPORTING: LOWER INCOME HOUSEHOLDS

KEY ISSUE: SHOULD THE LEGISLATURE ELIMINATE A JULY 1, 2025 SUNSET OF A REQUIREMENT THAT LANDLORDS OF ASSISTED HOUSING DEVELOPMENTS OFFER TENANTS THE OPTION OF HAVING THEIR RENTAL PAYMENT INFORMATION REPORTED TO A CONSUMER credit bureau PROGRAM SO THAT IT BECOMES A PERMANENT REQUIREMENT?

SYNOPSIS

Many Californians who do not possess a robust credit history do have a history of paying rent on time. But that information does not show up on their credit reports and does not help their credit scores. To help alleviate this problem, SB 1157 (Bradford, Chap. 204, Stats. 2020) provided low-income tenants of assisted housing developments the opportunity to have their rental payment information reported to consumer reporting agencies, thereby building their credit history. SB 1157 required landlords of these developments, with the exception of some landlords of developments with 15 or fewer units, to offer tenants the option of having their rental payment information provided to consumer reporting agencies for a monthly fee not exceeding $10. That measure proved successful: A 2023 report by Esusu, a fintech company that provides rent reporting, found 3,000 new credit scores in California for previously credit-invisible renters in the aftermath of SB 1157’s adoption. This bill would remove SB 1157’s July 1, 2025 sunset and make the offer of credit reporting requirement permanent.

SUMMARY: Removes the July 1, 2025 sunset from the provisions of the Civil Code that require any landlord of an assisted housing development, as defined, to offer each tenant obligated on a lease the option of having the tenant’s rental payment information reported to at least one nationwide consumer reporting agency.

EXISTING LAW:

1) Defines an “assisted housing development” as a multifamily rental housing development of five or more units that receives governmental assistance under specified federal laws and programs, such as under Section 8 of the U.S. Housing Act of 1937 (42 U.S.C. Section 1437(f)), and the Below-Market-Interest-Rate Program under Section 221(d)(3) of the National Housing Act (12 U.S.C. § 1715 l(d)(3) and (5)), and specified state laws and local programs, such as local housing trust funds, as referred to in paragraph (3) of subdivision (a) of Section 50843 of the Health and Safety Code. (Government Code Section 65863.10 (a)(3).)

2) Requires, beginning July 1, 2021, that any landlord of an assisted housing development offer a tenant obligated on a lease in the housing development the option of having their rental payments reported to at least one nationwide consumer reporting agency or other consumer reporting agency, as defined. (Civil Code Section 1954.06 (a). All further statutory references are to the Civil Code, unless otherwise indicated.)

3) Exempts a landlord of an assisted housing development that contains 15 or fewer dwelling units from the provisions of 2), unless the landlord owns more than one assisted housing development, regardless of the number of units in each assisted housing development, and the landlord is one of the following: (a) a real estate investment trust, (b) a corporation, or (c) a limited liability company in which at least one member is a corporation. (Section 1954.06 (j).)

4) Requires that an offer of rent reporting be in writing and contain specified information, including a statement that the reporting is optional, identification of each consumer reporting agency to which the rental payment information will be reported, a statement that all of the tenant’s rental payments will be reported, regardless of whether they are timely, late, or missed, the amount of any fee charged by the landlord for reporting, instructions on how to submit the written election of rent reporting, a statement that the tenant may opt into rent reporting at any time, a statement that the tenant may elect to stop reporting at any time, but that they will not be able to resume rent reporting for at least six months afterward, instructions on how to opt out, and a signature block for the tenant to use to request rent reporting. Requires the landlord to provide a self-addressed, stamped envelope for returning the election when they provide the offer of rent reporting. (Sections 1954.06 (c)-(d).)

5) Requires that, if a tenant elects to have their rent reported, their election be in writing. (Sections 1954.06 (a), (c).)

6) Prohibits a landlord from accepting an election to begin rent reporting at the time of the offer, but allows the tenant to elect rent reporting at any time and request a copy of their election from the landlord. (Sections 1954.06 (a)-(e).)

7) Requires the offer of rent reporting, for leases entered into on and after July 1, 2021, to be made at the time of the lease agreement and at least once annually thereafter, and, for leases outstanding as of July 1, 2021, made no later than October 1, 2021, and at least once annually thereafter. (Section 1954.06 (b).)

8) Authorizes a landlord to charge a fee to a tenant who elects to have the tenant’s rental payments reported to a consumer reporting agency, in an amount not to exceed the lesser of either the actual cost to the landlord to provide the service, or $10 per month. (Section 1954.06 (f).)

9) Provides that, if a tenant fails to pay the fee required by the landlord for the rent reporting, the failure of payment cannot be cause for termination of the tenancy, the unpaid fee cannot be deducted from the tenant’s security deposit, and that the landlord may stop reporting the tenant’s rental payments if the fee remains unpaid for 30 days or more, and the tenant who has not paid cannot elect rent reporting again for a period of six months from the date on which the fee first became due. (Section 1954.06 (g).)

10) Provides that the payment or nonpayment of the fee cannot be reported to a consumer reporting agency. (Sections1954.06 (f) - (g).)

11) Authorizes a tenant who elects to have the tenant’s rental payments reported to a consumer reporting agency to subsequently file a written request with the tenant’s landlord to stop that reporting; however, a tenant that does so will not be allowed to elect rent reporting again for a period of at least six months from the date of the tenant’s written request. (Section 1954.06 (h).)

12) Provides that a tenant who elects to have rent reported does not forfeit any rights under Sections 1941 to 1942, inclusive, of the Civil Code, and the deduction or withholding of rent as authorized by those sections will not constitute a late rental payment. A tenant invoking the right to deduct or withhold is required to notify the landlord of the deduction or withholding prior to the date rent is due. (Section 1954.06 (i).)

13) Repeals thee provisions of 2) through 12) on July 1, 2025. (Section 1954.06 (l).)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

COMMENTS: Many Californians who do not possess a robust credit history do have a history of paying rent on time. But that information does not show up on their credit reports and does not help their credit scores. To help alleviate this problem, SB 1157 (Bradford, Chap. 204, Stats. 2020) provided low-income tenants of assisted housing developments the opportunity to have their rental payment information reported to consumer reporting agencies, adding to their credit history. SB 1157 required landlords of these developments, with the exception of some landlords of developments with 15 or fewer units, to offer tenants the option of having their rental payment information provided to consumer reporting agencies. That measure proved extremely successful: A 2023 report by Esusu, a fintech company that provides rent reporting, found 3,000 new credit scores in California for previously credit-invisible renters in the aftermath of SB 1157’s adoption. (Rent Reporting Legislation Leads to 3,000 New Credit Scores Established in California (Aug. 2023), available at https://www.globenewswire.com/en/news-release/2023/08/23/2730640/0/en/Rent-Reporting-Legislation-Leads-to-3-000-New-Credit-Scores-Established-in-California.html.)

This bill makes permanent a requirement that has demonstrated significant success. By removing the July 1, 2025 sunset, even more low-income Californians will have an opportunity to improve their credit scores by timely paying rent.

As explained by the author:

SB 924 will remove the July 1, 2025 sunset date of SB 1157 (Bradford, 2020) which requires any landlord of an assisted housing development to offer tenants the option of having their rental payments reported to a consumer reporting agency, effectively making this a permanent program. According to the Census’ American Community Survey, just over 44% of Californians rent their housing. Yet, at the present time, although failure to pay one’s rent has a negative impact on one’s credit, most Californians who make on-time rent payments fail to receive any benefit to their credit scores for making those on-time payments. Several studies have investigated whether rent reporting to major credit bureaus yields positive outcomes for renters, and results are consistent: rent reporting helps individuals who lack credit scores establish those scores and helps individuals with nonprime credit improve their credit scores. This bill builds on the success of SB 1157 and continues to provide a tool for low-income renters in California to improve their credit scores.

The impact of rent reporting on building credit. Several studies and pilot programs have shown that reporting the full rental history of low-income tenants to the major consumer reporting agencies will have a positive impact on most of those tenants’ credit scorability and credit scores. For example, a pilot of 1,255 tenants across eight affordable housing providers nationwide, including the East Bay Asian Local Development Corporation in California, resulted in dramatic findings: all residents participating in the pilot who initially had no credit score had either a high nonprime or prime score with the inclusion of their rental payment history, and a large majority (79 percent) of participants experienced an increase in credit score, with an average increase of 23 points. (Chenven and Schulte, The Power of Rent Reporting Pilot: A Credit Building Strategy (2015) Credit Builders Alliance and Citi Foundation https://creditbuildersalliance.org/wp-content/uploads/2019/06/CBA-Power-of-Rent-Reporting-Pilot-White-Paper.pdf, at p. 5.) General studies on the impact of rent payment reporting on credit conducted by the credit reporting agencies Experian and TransUnion showed similarly positive results. (See Credit for Renting (2014) Experian http://www.experian.com/assets/rentbureau/white-papers/experian-rentbureau-credit-for-rent-analysis.pdf (analysis of data on 20,000 subsidized housing residents “demonstrates the impact of positive rent reporting on credit file thickness, risk segment migration and credit scores for subsidized housing residents” at p. 6); TransUnion Analysis Finds Reporting of Rental Payments Could Benefit Renters in Just One Month (June 19, 2014) TransUnion https://newsroom.transunion.com/transunion-analysis-finds-reporting-of-rental-payments-could-benefit-renters-in-just-one-month (“reporting of rental payment information to the credit bureaus in a manner similar to other financial obligations could have a positive effect for the majority of subprime consumers’ credit”).)

The impact is not limited to increasing scores: key findings from a study commissioned by the U.S. Department of Housing and Urban Development concluded that rent reporting tended to “dramatically reduce unscorability.” The study found that the “rate of unscorability fell from 49 percent to 7 percent in one model and fell from 11 percent to 0 percent in the other model with the addition of full-file rental payment data. (Turner and Walker, Potential Impacts of Credit Reporting on Public Housing Rental Payment Data (Oct. 2019) Policy and Economic Research Council as commissioned by the U.S. Department of Housing and Urban Development https://www.huduser.gov/portal/sites/default/files/pdf/Potential-Impacts-of-Credit-Reporting.pdf, at p. 8.)

ARGUMENTS IN SUPPORT: The California Housing Partnership supports this measure:

Building and maintaining a good credit score is essential in today’s economy. It affects what an individual can buy, their access to financial tools, their ability to borrow money, and their ability to find affordable housing. Due to systemic issues, Californians with poor credit scores tend to be younger, low-income, and persons of color. For many, establishing a credit history can be challenging because enrolling in services or obtaining loans that would establish a credit history often requires having a credit history. SB 924 removes the sunset in current law that requires landlords of subsidized housing developments to offer their tenants the option to have their rental history reported to credit reporting agencies. This allows residents to build their credit through their rent payments.

SB 924 ensures that those left out of today’s economy can build a credit history to fully participate. We thank Senator Bradford for authoring this important bill, and for these reasons, the California Housing Partnership strongly supports SB 924.

REGISTERED SUPPORT / OPPOSITION:

Support

California Housing Partnership

City of Alameda

Opposition

None on file

Analysis Prepared by: Shiran Zohar / JUD. / (916) 319-2334

 THIRD READING  

Bill No: SB 924

Author: Bradford (D)

Amended: 4/16/24

Vote: 21

SENATE JUDICIARY COMMITTEE: 10-1, 4/2/24

AYES: Umberg, Wilk, Allen, Ashby, Caballero, Durazo, Laird, Min, Stern, Wahab

NOES: Niello

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT: Tenancy: credit reporting: lower income households

SOURCE: Author

DIGEST:

This bill eliminates the sunset date from provisions of the Civil Code that requires a landlord of an assisted housing development, as defined, to offer tenants the option to have their rental payments history reported to nationwide consumer credit reporting agencies, as specified, and makes other changes to the program.

ANALYSIS:

Existing law:

1. Defines, for the purposes of this section, an “assisted housing development” as having the same meaning as defined in Section 65863.10 of the Government Code, and defines a “landlord” as an owner of residential real property containing five or more dwelling units. (Civ. Code § 1954.06(k).)
2. Defines an “assisted housing development” as a multifamily rental housing development of five or more units that receives governmental assistance under specified federal laws and programs, such as under Section 8 of the U.S. Housing Act of 1937 (42 U.S.C. Section 1437(f)), and the Below-Market-Interest-Rate Program under Section 221(d)(3) of the National Housing Act (12 U.S.C. § 1715 l(d)(3) and (5)), and specified state laws and local programs, such as local housing trust funds, as referred to in paragraph (3) of subdivision (a) of Section 50843 of the Health and Safety Code. (Gov. Code § 65863.10(a)(3).)
3. Requires, beginning July 1, 2021, that any landlord of an assisted housing development offer a tenant obligated on the leases in the housing development the option of having their rental payments reported to at least one nationwide consumer reporting agency or other consumer reporting agency, as defined. (Civ. Code § 1954.06(a).)
4. Exempts a landlord of an assisted housing development that contains 15 or fewer dwelling units from these provisions, unless the landlord owns more than one assisted housing development, regardless of the number of units in each assisted housing development, and the landlord is one of the following: (a) a real estate investment trust, (b) a corporation, or (c) a limited liability company in which at least one member is a corporation. (Civ. Code § 1954.06(j).)
5. Requires that an offer of rent reporting be in writing and contain specified information, including a statement that the reporting is optional, identification of each consumer reporting agency to which the rental payment information will be reported, a statement that all of the tenant’s rental payments will be reported, regardless of whether they are timely, late, or missed, the amount of any fee charged by the landlord for reporting, instructions on how to submit the written election of rent reporting, a statement that the tenant may opt into rent reporting at any time, a statement that the tenant may elect to stop reporting at any time, but that they will not be able to resume rent reporting for at least six months afterward, instructions on how to opt out, and a signature block for the tenant to use to request rent reporting. Requires the landlord to provide a self-addressed, stamped envelope for returning the election when they provide the offer of rent reporting (Civ. Code §§ 1954.06(c)-(d).)
6. Requires that, if a tenant elects to have their rent reported, their election be in writing. Prohibits a landlord from accepting an election to begin rent reporting at the time of the offer, but allows the tenant to elect rent reporting at any time and request a copy of their election from the landlord (Civ. Code §§ 1954.06(a)-(e).)
7. Requires the offer of rent reporting, for leases entered into on and after July 1, 2021, to be made at the time of the lease agreement and at least once annually thereafter, and, for leases outstanding as of July 1, 2021, made no later than October 1, 2021, and at least once annually thereafter. (Civ. Code § 1954.06(b).)
8. Authorizes a landlord to charge a fee to a tenant who elects to have the tenant’s rental payments reported to a consumer reporting agency, in an amount not to exceed the lesser of either the actual cost to the landlord to provide the service, or $10 per month. (Civ. Code § 1954.06(f).)
9. Provides that, if a tenant fails to pay the fee required by the landlord for the rent reporting, the failure of payment cannot be cause for termination of the tenancy, the unpaid fee cannot be deducted from the tenant’s security deposit, and that the landlord may stop reporting the tenant’s rental payments if the fee remains unpaid for 30 days or more. Provides that the tenant cannot elect rent reporting again for a period of six months from the date on which the fee first became due. Provides that the payment or nonpayment of the fee cannot be reported to a consumer reporting agency. (Civ. Code §§ 1954.06(f) - (g).)
10. Authorizes a tenant who elects to have the tenant’s rental payments reported to a consumer reporting agency to subsequently file a written request with the tenant’s landlord to stop that reporting; however, a tenant that does so will not be allowed to elect rent reporting again for a period of at least six months from the date of the tenant’s written request. (Civ. Code § 1954.06(h).)
11. Provides that a tenant who elects to have rent reported does not forfeit any rights under Sections 1941 to 1942, inclusive, of the Civil Code, and the deduction or withholding of rent as authorized by those sections will not constitute a late rental payment. A tenant invoking the right to deduct or withhold is required to notify the landlord of the deduction or withholding prior to the date rent is due. (Civ. Code § 1954.06(i).)
12. Requires that, upon appropriation by the Legislature, an independent evaluator be selected by the Department of Financial Protection and Innovation (DFPI) to be responsible for conducting an evaluation of the impact of rental payment reporting in the state pursuant to this section, and provides the process for the evaluator to be competitively selected. Requires the evaluator to create a report that includes, but is not limited to, information about: (a) the estimated percentage of assisted housing developments in compliance with the rent reporting requirements of this section; (b) any significant barriers to compliance with that section experienced by assisted housing developments; the estimates number of participating tenants; (c) any significant barriers to participation experienced by tenants; (d) the estimated impact of participation on the credit scores of participating tenants living in assisted housing developments; and (e) the recommendations, if any, for changes to the rental payment reporting process established by this section that could positively impact tenants of assisted housing developments. Requires this annual report be posted on the internet website of DFPI and distributed to the appropriate policy committees of the Legislature on or before January 1, 2025. If the information required to be reported cannot be obtained due to an absence of data or other methodological constraints, requires DFPI to notify the Legislature of this fact and the actions taken to attempt to obtain the information, why the information was unable to be obtained, and any recommendations for statutory changes that could produce data, by January 1, 2024. (Civ. Code § 1954.06(l).)
13. Repeals these provisions on July 1, 2025. (Civ. Code § 1954.06(l).)

This bill:

1. Extends the applicability of Civil Code section 1954.06 indefinitely.
2. Provides that, with the agreement of the tenant, the landlord may provide the offer of rent reporting to the tenant by first-class United States mail or email.
3. Provides that the landlord must provide with the offer instructions on how the tenant can submit written election of rent reporting to the landlord by first-class United States mail or by email.
4. Specifies that, if the offer is made by first-class United States mail, the landlord must provide the tenant with a self-addressed, stamped envelope for returning the written election by mail.
5. Eliminates the provisions described in 12), above, relating to the appointment of an independent evaluator to evaluate the rent reporting requirement created by these provisions.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 4/24/24)

City of Alameda

OPPOSITION: (Verified 4/24/24)

None received

ARGUMENTS IN SUPPORT: In support of this bill, the City of Alameda writes:

Having an established credit history is vital to accessing many consumer services and obtaining loans. Credit checks are frequently required for things like renting an apartment, buying a house, obtaining basic utility services or a cell phone, getting a credit card, and borrowing money from a bank. Some employers even check an applicant’s consumer credit record as part of the hiring process.

Some people are fortunate to be able to begin establishing a credit history early in their lives through things like convincing someone with good credit to co-sign on a loan or simply getting added to a parent’s credit card account. For those who do not have these options, establishing a credit history can be enormously challenging because enrolling in services or obtaining loans that would establish a credit history often requires having a credit history. This catch-22 shuts many low-income individuals out of the formal economy, forcing them to make inflated deposits to obtain things like housing or utility services, steering them away from keeping money in interest-bearing accounts and driving them into the hands of financial services with hefty fees and high interest rates, like pay-day lenders and check-cashing companies. Statistics show that a lack of credit impacts a large segment of our population and disproportionately affects those with low income and communities of color.

Current law, which sunsets on January 1, 2025, requires landlords of subsidized housing developments to offer their tenants the option to have their rental payments reported to at least one consumer credit reporting agency. Current law allows for the landlord to charge a tenant that elects to have this information reported to a credit reporting agency $10 per month or the actual cost to the landlord to provide this service.

SB 924 will remove the sunset in current law, making permanent the ability for renters living in subsidized housing to have the option to build their

credit through the reporting of their monthly rent payments to a consumer

credit reporting agency.

Prepared by: Ian Dougherty / JUD. / (916) 651-4113

4/24/24 13:52:48

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Thomas Umberg, Chair

2023-2024 Regular Session

Bill No: SB 924 (Author:Bradford)

Version: January 11, 2024

Hearing Date: April 2, 2024

Fiscal: Yes

Urgency: No

Consultant: ID

SUBJECT

Tenancy: credit reporting: lower income households

DIGEST

This bill eliminates the sunset date from provisions of the Civil Code that requires a landlord of an assisted housing development, as defined, to offer tenants the option to have their rental payments history reported to nationwide consumer credit reporting agencies, as specified.

EXECUTIVE SUMMARY

Building and maintaining a good credit score is essential in today’s economy. Credit scores are calculated by companies through mathematical formulas, called scoring models, utilizing an individual’s credit information contained within a credit report. Credit scores are often utilized to gauge the credit worthiness of a consumer; for example, they are used by banks to determine if and under what conditions to provide an individual a loan, by credit card companies for a consumer to open a credit card account, and by landlords for determining whether to rent an apartment to a particular applicant. An individual’s credit score thus affects what that individual can buy, their access to important financial tools and support, their ability to borrow money, what interest rates they may be able to obtain on loans, and their ability to find affordable housing. Despite the importance of maintaining a good credit score, many in California and throughout the United States have poor credit, or no credit score at all. These Californians tend to be younger, low-income, and persons of color. In order to increase the number of Californians with credit scores and the credit scores of low-income Californians, the Legislature passed SB 1157 (Bradford, Ch. 204, Stats. 2020), requiring assisted housing developments in California to offer the option of reporting the rental payments of its residents to consumer reporting agencies for inclusion in a resident’s credit record. SB 1157 included a sunset date of July 1, 2025. This bill eliminates that sunset, thereby making the program permanent. This bill is sponsored by the author and supported by the City of Alameda. The Committee has received no opposition.

PROPOSED CHANGES TO THE LAW

Existing law:

1. Defines an “assisted housing development” as a multifamily rental housing development of five or more units that receives governmental assistance under specified federal laws and programs, such as under Section 8 of the U.S. Housing Act of 1937 (42 U.S.C. Section 1437(f)), and the Below-Market-Interest-Rate Program under Section 221(d)(3) of the National Housing Act (12 U.S.C. § 1715 l(d)(3) and (5)), and specified state laws and local programs, such as local housing trust funds, as referred to in paragraph (3) of subdivision (a) of Section 50843 of the Health and Safety Code. (Gov. Code § 65863.10(a)(3).)
2. Requires, beginning July 1, 2021, that any landlord of an assisted housing development offer a tenant obligated on the leases in the housing development the option of having their rental payments reported to at least one nationwide consumer reporting agency or other consumer reporting agency, as defined. (Civ. Code § 1954.06(a).)
3. Exempts a landlord of an assisted housing development that contains 15 or fewer dwelling units from these provisions, unless the landlord owns more than one assisted housing development, regardless of the number of units in each assisted housing development, and the landlord is one of the following: (a) a real estate investment trust, (b) a corporation, or (c) a limited liability company in which at least one member is a corporation. (Civ. Code § 1954.06(j).)
4. Requires that an offer of rent reporting be in writing and contain specified information, including a statement that the reporting is optional, identification of each consumer reporting agency to which the rental payment information will be reported, a statement that all of the tenant’s rental payments will be reported, regardless of whether they are timely, late, or missed, the amount of any fee charged by the landlord for reporting, instructions on how to submit the written election of rent reporting, a statement that the tenant may opt into rent reporting at any time, a statement that the tenant may elect to stop reporting at any time, but that they will not be able to resume rent reporting for at least six months afterward, instructions on how to opt out, and a signature block for the tenant to use to request rent reporting. Requires the landlord to provide a self-addressed, stamped envelope for returning the election when they provide the offer of rent reporting (Civ. Code §§ 1954.06(c)-(d).)
5. Requires that, if a tenant elects to have their rent reported, their election be in writing. Prohibits a landlord from accepting an election to begin rent reporting at the time of the offer, but allows the tenant to elect rent reporting at any time and request a copy of their election from the landlord (Civ. Code §§ 1954.06(a)-(e).)
6. Requires the offer of rent reporting, for leases entered into on and after July 1, 2021, to be made at the time of the lease agreement and at least once annually thereafter, and, for leases outstanding as of July 1, 2021, made no later than October 1, 2021, and at least once annually thereafter. (Civ. Code § 1954.06(b).)
7. Authorizes a landlord to charge a fee to a tenant who elects to have the tenant’s rental payments reported to a consumer reporting agency, in an amount not to exceed the lesser of either the actual cost to the landlord to provide the service, or $10 per month. (Civ. Code § 1954.06(f).)
8. Provides that, if a tenant fails to pay the fee required by the landlord for the rent reporting, the failure of payment cannot be cause for termination of the tenancy, the unpaid fee cannot be deducted from the tenant’s security deposit, and that the landlord may stop reporting the tenant’s rental payments if the fee remains unpaid for 30 days or more. Provides that the tenant cannot elect rent reporting again for a period of six months from the date on which the fee first became due. Provides that the payment or nonpayment of the fee cannot be reported to a consumer reporting agency. (Civ. Code §§ 1954.06(f) - (g).)
9. Authorizes a tenant who elects to have the tenant’s rental payments reported to a consumer reporting agency to subsequently file a written request with the tenant’s landlord to stop that reporting; however, a tenant that does so will not be allowed to elect rent reporting again for a period of at least six months from the date of the tenant’s written request. (Civ. Code § 1954.06(h).)
10. Provides that a tenant who elects to have rent reported does not forfeit any rights under Sections 1941 to 1942, inclusive, of the Civil Code, and the deduction or withholding of rent as authorized by those sections will not constitute a late rental payment. A tenant invoking the right to deduct or withhold is required to notify the landlord of the deduction or withholding prior to the date rent is due. (Civ. Code § 1954.06(i).)
11. Repeals these provisions on July 1, 2025. (Civ. Code § 1954.06(l).)

This bill extends the applicability of Civil Code section 1954.06 indefinitely.

COMMENTS

1. Author’s Statement

According to the author:

SB 924 will remove the July 1, 2025 sunset date of SB 1157 (Bradford, 2020) which requires any landlord of an assisted housing development to offer tenants the option of having their rental payments reported to a consumer reporting agency, effectively making this a permanent program. According to the Census’ American Community Survey, just over 44% of Californians rent their housing. Yet, at the present time, although failure to pay one’s rent has a negative impact on one’s credit, most Californians who make on-time rent payments fail to receive any benefit to their credit scores for making those on-time payments. Several studies have investigated whether rent reporting to major credit bureaus yields positive outcomes for renters, and results are consistent: rent reporting helps individuals who lack credit scores establish those scores and helps individuals with nonprime credit improve their credit scores. This bill builds on the success of SB 1157 and continues to provide a tool for low-income renters in California to improve their credit scores.

1. The importance of helping people who are credit invisible to build their credit

Many Californians have credit scores: scores that attempt to predict an individual’s credit behavior and risk based on past financial decisions and behaviors. These scores are calculated by companies through mathematical formulas, called scoring models, that utilize an individual’s credit information contained within a credit report. Credit reports are compiled by consumer reporting agencies that collect and store financial information about individuals submitted to them by creditors, lenders, credit card companies, and other entities that handle financial transactions and credit.^[1] The types of information provided in credit reports often includes basic information on active and previous credit card accounts, lines of credit, loans, mortgages, credit limits, foreclosures, bankruptcies, missed payments, and unpaid bills sent to collections. There are a few major, nationwide consumer reporting agencies, and other companies that calculate credit scores with proprietary scoring models from the credit reports available from consumer reporting agencies.

Building and maintaining good credit is essential in today’s economy. This is because credit scores are often utilized to gauge the credit worthiness of an individual, such as in the context of obtaining a loan, buying high-priced items requiring monthly payments to pay off, opening a credit card account, borrowing money from a bank, purchasing a home, and renting an apartment. An individual’s credit score thus affects what that individual can buy, their access to important financial tools and support, their ability to borrow money, what interest rates they may be able to obtain on loans, and their ability to find affordable housing.

Despite the importance of maintaining a good credit score, many in California and throughout the United States have poor credit, or no credit score at all. Consumers without a credit record are often called “credit invisible,” while others have incomplete or stale credit records such that their record is considered “unscorable.”^[2] These two groups of consumers often lack a credit score because of a lack of a complete credit record. The Consumer Financial Protection Bureau (CFPB) found that, as of 2010, about 26 million consumers in the United States were credit invisible, while an additional 8.3 million consumers had credit records that were considered “unscorable” by a commercially-available credit scoring model.^[3] Large numbers of these credit invisible consumers and consumers without scorable credit records live in California. In fact, of the metropolitan areas with the largest number of credit invisible or unscorable consumers, the Los Angeles-Long Beach-Anaheim metropolitan area ranks second in the United States. It has 1.7 million credit invisible or unscorable consumers, representing 17.4% of total consumers in metropolitan area.^[4] Four California metropolitan areas are in the top 20 metropolitan areas by number of credit invisible and unscorable consumers: Los Angeles-Long Beach-Anaheim, San Francisco-Oakland-Hayward, Riverside-San Bernardino-Ontario, and San Diego-Carlsbad., with almost 3.3 million credit invisible or unscorable consumers in total.

Credit invisible and unscorable consumers tend to be young, low-income, and people of color. Over 10 million of the 26 million who are credit invisible are between the ages of 18 and 25, while about 17.4 million consumers aged 25 to 50 are either credit invisible or have unscorable credit records.^[5] Low-income consumers are more likely to lack credit records or scores, as the CFPB found that almost 30 percent of consumers in low-income neighborhoods are credit invisible and 15 percent have unscored records.^[6] It also found that African American and Latino consumers are more likely than Caucasian or Asian consumers to be credit invisible or lack scorable credit records.

Lacking a credit score and credit history can have dire consequences. It can prevent an individual from qualifying for loans, from being able to obtain reasonable terms on a loan they do receive, from being able to purchase large items, from qualifying for or being selected for an apartment, and even from being offered a job. Thus, a lack of a credit score can hold many families and individuals back from being able to access basic needs or financial tools that could help them improve their financial situation, start a business, and build wealth. In a sense, lacking a credit record and credit score can thus act as a sort of “catch-22,” preventing consumers from being able to access the kinds of financial tools and credit that would help them build more credit history.

1. Legislative attempts to help renters improve their credit when they make rental payments

In light of this conundrum and the numbers of consumers without credit records or scores, various attempts to provide alternative data for creating credit scores have been undertaken. Some have argued for including rental payments in credit histories, as rent is often a bill that many consumers regularly pay that is not typically reflected in credit reports. Proponents of this idea argue that meeting rent payments should count for a consumer’s credit score, as an indicator of their credit worthiness. In many cases, regular payments of rent may be one of the few major financial transactions an individual has, which, if included in a consumer’s credit record, would allow them to build their credit history and score when they otherwise would not be able to do so. Allowing such rent payments to be included in credit records may make even more sense considering that evictions and unpaid rent currently can be reflected on consumers’ credit records and negatively affect their credit scores.

In 2019, SB 619 by Senator Hueso attempted to create a pilot program for tenants living in large, state-subsidized housing developments within defined “Promise Zones” to opt into having their rent payments reported to major credit reporting agencies. The bill was passed seven to zero by the Senate Judiciary Committee. However, the entire bill was subsequently gutted and amended to amend the Military and Veterans Code and therefore did not ultimately create such a pilot program. However, in 2020, SB 1157 (Bradford, Ch. 204, Stats. 2020) was enacted and created the program which this bill continues. SB 1157 passed out of the Senate Judiciary Committee on a vote of seven to zero. Under SB 1157, landlords of assisted housing developments, or certain multi-family housing developments that receive specified Federal, state, or local assistance, must provide tenants a written offer to have their rental payments reported to at least one of the major nationwide consumer reporting agencies annually. It allows tenants to accept the offer in writing at any time, except for immediately at the time of offer, and allows tenants to request that the landlord stop reporting their rental payments at any time. However, if a tenant stops rent reporting, they cannot elect to restart rent reporting for at least six months. SB 1157 thoughtfully included protections to ensure that a renter’s exercising of their rights to withhold rent when a landlord has breached the warranty of habitability or deduct from rent the costs of repair when a landlord fails to repair the premises themselves does not negatively affect the renter’s credit. It also included provisions allowing a landlord to charge a fee for rent reporting of either ten dollars a month or the actual cost of reporting the rent payments, whichever is lower.

1. The impact of SB 1157’s pilot program and rent reporting to credit reporting agencies

In 2022, the Legislature passed SB 1396 (Bradford, Ch. 670, Stats. 2022) to require that the Department of Financial Protection and Innovation select an independent evaluator to evaluate the impact of rent reporting under SB 1157, upon appropriation from the Legislature. However, this evaluation has yet to be done because no funds have been appropriated by the Legislature for that purpose.

Data on the impact of rent reporting does nonetheless exist that demonstrates that the program is generally a net benefit to renters who utilize it. A 2014 report by Experian, one of the three major consumer reporting agencies, found that reporting positive rent payments for 20,000 residents in subsidized housing resulted in 100 percent of credit invisible residents (eleven percent of the population) gaining a credit record and becoming scorable, with 23 percent of those with thin credit records obtaining more complete, “thick file” credit records that help obtain better credit and terms for credit.^[7] The report further found that 75 percent of residents in the survey experienced a credit score increase, the majority of which experienced a score increase of 11 points or more. The writers of the report noted that:

Positive rent reporting presents an opportunity for subsidized housing property managers and owners to play a key role in helping their residents build credit history. The ability for many of these consumers to become scorable, build a more robust credit file and potentially migrate to a better risk segment simply by paying their rent on time each month is powerful and represents an opportunity for positive change that should not be overlooked. Subsidized housing residents who pay their rent on time should not be credit-disadvantaged simply because they rent instead of own the place they call home.^[8]

Other reports have found similar results. In a 2015 study, Citi Foundation, Experian RentBureau, and the Credit Builders Alliance began a pilot project in which eight affordable housing providers throughout the United States (including a provider in the Bay Area) provided rent payment reporting on behalf of 1,255 low-income renters.^[9] The study found that all participants who had no credit score at the beginning of the pilot obtained a credit score with the inclusion of rental payment history in their credit record, with 79 percent of participants experiencing an increase in their credit score of an average of 23 points. 14 percent experienced no increase in their credit score, and only seven percent experienced a decrease in their credit score.^[10] A 2019 study by the U.S. Department of Housing and Urban Development similarly found that the inclusion of full-file rental payment histories dramatically reduced unscorability, increased credit scores more than it decreased them, and ultimately resulted in a noticeable increase in the share of surveyed consumers who were scorable with credit scores of about 620.^[11] Additionally, Esusu, one third party vendor that assists in providing rent payment information to consumer reporting agencies, reported that its analysis of a dataset of 23,972 rental units found that participating in rent reporting created 3,000 new credit scores, resulted in an average credit score increase of 140 points, created 531 million dollars in capital access and 313 million dollars in mortgage loans, and resulted in a variety of other benefits.^[12]

While reports on the implementation and impact of SB 1157 are limited, one study from the U.S. Housing and Urban Development Department’s Office of Policy Development and Research attempted to do so through interviews with eight assisted housing development owners and managers. The report made several findings, including that knowledge of the law and implementation strategies varied among landlords, that resident participation was estimated to range between four to 15 percent, that the COVID-19 pandemic impacted the program and communicating its benefits to residents, and that the majority of landlords interviewed covered the enrollment fees on behalf of their residents.^[13] It also reported that one landlord reported an average increase of 39 points in tenants’ credit score, while another reported that 44 residents established new credit history and 44 percent improved their scores. The report also made a variety of policy recommendations, including: to implement an education campaign targeting low-income renters; incorporate rent reporting into financial literacy and economic empowerment programs; utilize standardized forms to clarify reporting; contact information; and legal rights; and to fund dedicated staff to help enroll residents. However, it should be noted that this report did not interview a large enough number of housing developments to constitute a complete survey or representative sample of all housing developments and residents covered by SB 1157.

Considering these reports and data, it is clear that rent reporting presents an opportunity to low-income and middle-income for establishing and increasing credit scores.

1. This bill removes the sunset on the law enacted by SB 1157

When SB 1157 was passed in 2021, it included a provision that sunset its provisions on July 1^st, 2025. Thus, the requirement that assisted housing developments provide residents the option to request their rent payments be reported to nationwide consumer reporting agencies will expire in July of 2025. This bill would make the program permanent by simply repealing the sunset provision in the statute. The bill does not expand the requirements on landlords under the program as established by SB 1157, or change the program in any other way. If signed into law, this bill will continue the program as established by SB 1157, continuing to provide residents of assisted housing developments the opportunity to have their rent payments reported to a national consumer reporting agency so that they can build their credit history, improve their credit scores, and gain greater access to the credit and financial tools that are so essential in today’s economy.

1. Arguments in support

In support of this bill, the City of Alameda writes:

Having an established credit history is vital to accessing many consumer services and obtaining loans. Credit checks are frequently required for things like renting an apartment, buying a house, obtaining basic utility services or a cell phone, getting a credit card, and borrowing money from a bank. Some employers even check an applicant’s consumer credit record as part of the hiring process.

Some people are fortunate to be able to begin establishing a credit history early in their lives through things like convincing someone with good credit to co-sign on a loan or simply getting added to a parent’s credit card account. For those who do not have these options, establishing a credit history can be enormously challenging because enrolling in services or obtaining loans that would establish a credit history often requires having a credit history. This catch-22 shuts many low-income individuals out of the formal economy, forcing them to make inflated deposits to obtain things like housing or utility services, steering them away from keeping money in interest-bearing accounts and driving them into the hands of financial services with hefty fees and high interest rates, like pay-day lenders and check-cashing companies. Statistics show that a lack of credit impacts a large segment of our population and disproportionately affects those with low income and communities of color.

Current law, which sunsets on January 1, 2025, requires landlords of subsidized housing developments to offer their tenants the option to have their rental payments reported to at least one consumer credit reporting agency. Current law allows for the landlord to charge a tenant that elects to have this information reported to a credit reporting agency $10 per month or the actual cost to the landlord to provide this service.

SB 924 will remove the sunset in current law, making permanent the ability for renters living in subsidized housing to have the option to build their credit through the reporting of their monthly rent payments to a consumer credit reporting agency.

SUPPORT

City of Alameda

OPPOSITION

None received

RELATED LEGISLATION

Pending Legislation: None known.

Prior Legislation:

AB 485 (Davies, 2023) would have required that a landlord who charges an application screening fee and uses a credit reporting service to provide the applicant a copy of the consumer credit report within 24 hours of a request for the copy of the report from the applicant. The bill died in the Assembly Judiciary Committee.

SB 1324 (Durazo, 2022) would have required landlords to adhere to the conduct standards of the Rosenthal Fair Debt Collection Practices Act when demanding payment of delinquent rent, and would have specified that landlords do not need to list a debt collector license number when trying to collect from their tenants. The bill was held in the Senate Appropriations Committee.

SB 1396 (Bradford, Ch. 670, Stats. 2022) required an independent evaluator, upon appropriation by the Legislature, to be selected by the Department of Financial Protection and Innovation to conduct an annual evaluation on the impact of rental payment reporting under SB 1157, as prescribed, and publish the report on the Department’s website and distribute to appropriate Legislative policy committees.

SB 1157 (Bradford, Ch. 204, Stats. 2020) required, until July 1, 2025, that a landlord of an assisted housing development, as defined, offer tenants the option of having their rental payments reported to at least one consumer reporting agency, as specified.

SB 619 (Hueso, 2019) would have created, prior to substantive amendments, a pilot program for tenants living in large, state-subsidized housing developments located within Promise Zones to opt into having their rent payments reported to major credit reporting agencies.

**************

1. “What is a credit report?” Consumer Financial Protection Bureau (Jan. 29, 2024), available at https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-report-en-309/. ↑

2. Kenneth P. Brevoort, Philipp Grimm, & Michelle Kambara, Data Point: Credit Invisibles (Consumer Financial Protection Bureau, Office of Research, May 2015) p. 4. ↑

3. Id., at 6. ↑

4. Consumer Financial Protection Bureau, Who are the credit invisibles? How to help people with limited credit histories­ (Dec. 2016), Appendix A. ↑

5. Brevoort et al., 14. ↑

6. Id., at 24. ↑

7. Experian Rent Bureau, Credit for Renting: The Impact of Positive Rent Reporting on Subsidized Housing Residents, Experian Information Solutions, Inc. (2014) p. 7. ↑

8. Id. ↑

9. Sarah Chenven and Carolyn Schulte, The Power of Rent Reporting Pilot: A Credit Building Strategy, Credit Builders Alliance (2015). ↑

10. Id., at 5. ↑

11. Michael Turner & Patrick Walker, Potential Impacts of Credit Reporting Public Housing Rental Payment Data, (U.S. Dept. of Housing and Urban Dev. 2019). ↑

12. Esusu, Rent Reporting Legislation Leads to 3,000 New Credit Scores Established in California (Aug. 23, 2023) https://esusurent.com/press/rent-reporting-legislation-leads-to-3000-new-credit-scores-established-in-california/ . ↑

13. Brad Pollock, Zach McRae, & Elizabeth Rudd, Understanding the Implementation of Rent Reporting Programs for Residents of Affordable Housing in California, U.S. Housing & Urban Development, Office of Policy Development and Research (June 28 2022), available at https://www.huduser.gov/portal/pdredge/pdr-edge-trending-062822.html#:~:text=In%202020%2C%20the%20California%20State,reported%20to%20major%20credit%20bureaus. ↑