AppFolio, a California-based property management software and screening company, has agreed to pay a $4.25 million settlement to the Federal Trade Commission.

The complaint, which the FTC filed earlier this year, claimed that the company violated Fair Credit Reporting Act by failing to ensure that the third-party tenant information it included in screening reports was fully accurate. Eviction and non-conviction criminal records older than seven years may have also been included, which would also be in violation of the act.

According to the complaint, the information was included in screening reports provided to landlords up until April 2019 and led some to be denied housing.

“In multiple instances, Defendant’s failure to follow reasonable procedures to assure maximum possible accuracy of Consumer Reports may have led to the denial of housing or other opportunities,” reads the complaint.

While the information that AppFolio included generally came from third-party providers such as CoreLogic, the FTC alleged that it failed to properly screen for accuracy before submitting the reports. As a result, errors such as multiple entries for the same offense, offenses older than seven years, and records for people with a different name or birthdate may have gone out in the reports provided to landlords.

Property managers and landlords often rely on external screening software to vet the reputation of applicants. AppFolio’s screening problems, the FTC alleges, affected the overall impression of a tenant’s “credit worthiness, general reputation, and personal characteristics” in the eyes of those offering housing. AppFolio did not immediately return Inman’s request for comment on the settlement.

“Consumers face enough hurdles in obtaining housing without the additional burden of inaccurate background checks,” Andrew Smith, director of the FTC’s Bureau of Consumer Protection, said in a press statement. “AppFolio and all background screening agencies must follow reasonable procedures to ensure that the background reports that they provide to their customers are as accurate as possible.”

Along with the monetary sum, the settlement requires AppFolio to ensure that eviction and non-conviction criminal records older than seven years do not go out in any reports going forward. All future screening reports also need to ensure  “maximum possible accuracy.”

Back in June, AppFolio reported that its shares grew by nearly 50 percent amid the pandemic while its revenue increased by $72.5 million, or 27 percent growth year-over-year as more property managers turned to its cloud management software to continue working remotely.

Email Veronika Bondarenko

IDX Real Estate