Tenant Application & Screening Fees: When Well-Intended Policy Collides with Federal Law

Hawaiʻi lawmakers are once again grappling with a real and important problem: the cost burden renters face when applying for housing. With vacancy rates tight, prospective tenants often submit multiple applications, paying multiple screening fees in the process.

House Bill 2188 (2026), titled the Hawaiʻi Tenant Screening Fairness Act, attempts to address this issue by requiring landlords to accept “comprehensive reusable tenant screening reports” purchased by applicants and, in many cases, prohibiting landlords from charging an application screening fee when such reports are provided HB2188. The goal is reducing duplicative costs for tenants and it is understandable. However, the mechanism proposed in HB 2188 creates serious legal, compliance, and liability issues for housing providers, particularly independent “mom-and-pop” housing providers who already operate under a dense web of regulation.

At the heart of the problem is a conflict with federal law.

The Fair Credit Reporting Act: What Housing Providers Are Required to Do

Tenant screening reports are not informal documents. They are consumer reports governed by the federal Fair Credit Reporting Act (FCRA).

Under the FCRA, a landlord who uses a credit or background report must:

• Have a permissible purpose to obtain the report

• Ensure the report is obtained from a consumer reporting agency (CRA)

• Certify that the report is used for housing decisions

• Maintain chain-of-custody, data security, and disposal compliance

• Issue adverse action notices if the report contributes to a denial or conditional approval

Critically, most tenant screening platforms are structured so that the landlord initiates the request, certifies permissible purpose, and receives the report directly from the CRA. This is not a technical preference, it is how federal compliance is maintained. See https://www.ftc.gov/business-guidance/resources/using-consumer-reports-what-landlords-need-know. HB 2188 flips this structure.

Why “Reusable Tenant Screening Reports” Create Risk

HB 2188 would require landlords to accept applicant-initiated screening reports prepared within the prior thirty (30) days and transmitted at the applicant’s direction HB2188. While the bill assumes this eliminates duplication and fraud, it raises several unresolved issues:

1. Permissible Purpose & Certification Gaps

Under FCRA, landlords must certify the permissible purpose at the time the report is obtained. When the applicant controls the request and distribution, landlords may lack the required certification trail.

2. Adverse Action Liability

If a landlord denies an applicant based on a report they did not initiate, verify, or select, they still retain full responsibility for:

• Accuracy disputes

• Adverse action notices

• Potential FCRA violations

In other words, liability remains with the housing provider but control of the report, when it is pulled and how it is processed does not.

3. Incomplete or Incompatible Reports

Not all screening reports are created equal. Many landlords rely on customized criteria, local eviction databases, or identity verification tools that may not be included in a “reusable” report. HB 2188 requires acceptance, however not equivalency.

4. Disproportionate Impact on Small Housing Providers

Large institutional landlords may be able to absorb compliance risk or redesign systems. But the majority of rental housing in Hawaiʻi is provided by independent housing providers, and they cannot absorb this risk.

Application Fees Are Already Regulated in Hawaiʻi

It is also important to note that Hawaiʻi already regulates application screening fees under existing law, and this means that any fees collected may only cover actual screening costs; unused amounts must be returned to the applicant, and applicants are entitled to receipts and cost breakdowns. Unfortunately, HB 2188 does not build on this framework, but rather it replaces it with a mandate that removes flexibility without removing liability.

A Better Path Forward: Fair to Tenants, Workable for Providers

HRHPA believes tenant protection and responsible screening can coexist. A better solution would be to:

• Continue to allow landlords to accept applicant-provided reports voluntarily, provided they meet defined standards, but do not mandate acceptance.

• Require screening platforms offering “reusable reports” to include Landlord permissible-purpose certification, FCRA-compliant adverse action support, and verification that the landlord is an authorized end user. ‘

• Cap screening fees at actual, documented costs, indexed to common screening platform pricing, rather than eliminating fees entirely.

• If a landlord accepts a reusable report in good faith, the statute should provide explicit liability protection from FCRA claims arising from report accuracy or transmission.

The Bottom Line

Tenant screening is not just a transaction, it is a risk-management and compliance function governed by federal law. Any state-level reform must align with that reality. HB 2188 identifies a real pain point for renters, but as drafted, it shifts cost and legal risk onto housing providers without reducing liability, which is a tradeoff that ultimately harms both sides of the rental market. Smart policy should reduce friction without breaking compliance. That’s the balance Hawaiʻi should be striving for.