HUD Secretary’s Memorandum Concerning “Junk Fees” and Tenant Screening Reports

Courtesy of Saul Ewing LLP, JDSupra

On March 7, 2023, the U.S. Department of Housing and Urban Development (the “HUD”) Secretary, Marcia L. Fudge, issued a public memorandum (the “Memo”) expressing concern over a lack of transparency in fees charged to residential tenants. The Memo calls on housing providers and state and local governments to adopt policies promoting fairness and transparency of fees charged to renters, citing President Biden’s urging that federal agencies “crack down” on so-called “junk fees” across the economy, including housing. The referenced fees include application fees, move-in fees, late fees, high-risk fees or security bonds, and convenience fees for online payments. The Memo also expresses continued concern over tenant screening practices, and commits to releasing best practices on the use of such reports to be developed with several other agencies.

​What You Need to Know:

• On March 7, 2023, HUD Secretary Marcia L. Fudge issued a memorandum continuing to highlight concerns over “junk fees” and tenant screening practices that inhibit fairness and transparency in rental housing.
•  Secretary Fudge offered four specific policies to promote fairness and transparency for renters, including eliminating and/or limiting application fees, allowing a single application fee to cover multiple applications, eliminating duplicative, excessive and/or undisclosed fees, and more clearly identifying total recurring monthly costs to tenants.
• HUD, the Consumer Financial Protection Bureau, the Federal Housing Finance Agency, the Federal Trade Commission, and the U.S. Department of Agriculture will collaborate to release best practices on the use of tenant screening reports, including the importance of communicating whether such reports are used to reject applicants or increase fees and providing applicants with the opportunity to address inaccurate information therein.

Secretary Fudge’s memo is yet another follow-up to the Biden-Harris Administration’s Blueprint for a Renter Bill of Rights that was designed to promote fairness and equity in rental housing. She urges all housing providers and state and local governments to take actions to ensure that only actual and legitimate fees are assessed to renters. She also endorsed specific policies that HUD hopes to see implemented across all rental housing providers and property management companies, including:

• Eliminating rental application fees or limiting application fees to only those necessary to cover actual and legitimate costs for services;
• Allowing a single application fee to cover multiple applications on the same platform or across multiple properties owned by one housing provider or managed by one company across providers;
• Eliminating duplicative, excessive, and undisclosed fees at all stages of the leasing process such as administrative fees and other processing fees in addition to rental application fees; and
• Clearly identifying bottom-line amounts that tenants will pay for move-in and monthly rent in advertisements of rental property and in lease documents, including all recurring monthly costs and their purpose.

Secretary Fudge also reiterated that HUD will coordinate with the Consumer Financial Protection Bureau, Federal Housing Finance Agency, Federal Trade Commission, and U.S. Department of Agriculture to collectively develop and release best practices on the use of tenant screening reports, including the importance of communicating whether such reports are used to reject applicants or increase fees and providing applicants with the opportunity to address inaccurate information therein.

The Memo is yet another indicator of the heightened scrutiny owners/operators of rental housing are facing at the federal, state and local levels surrounding pass-through costs and other fees charged to tenants and the use of tenant screening reports. Housing providers should continue to evaluate the need to revise their existing policies and practices surrounding these issues given the ongoing “whole of government effort” to “crack down” on industry-wide practices and the derivative Fair Housing Act and other statutory implications.