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Social Media Concerns Potentially Affecting Arizona’s Real Estate Industry

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By:  Jefferson R. Hayden

A growing number of governmental authorities are cracking down on the use of social media with regard to commercial transactions.  In Arizona, for example, legislation was proposed restricting an employer’s right to access social media account information of its employees.  Though SB 1411 was not passed in 2013, the Arizona real estate industry should pay close attention to its own social media practices since it is covered by the Fair Housing Act.  If the legislative progression of other states is any indicator, the Arizona real estate industry may also encounter future issues in both the landlord/tenant and lending realms.

Certain housing providers are prohibited from discriminating against individuals on the basis of their race, color, religion, sex, handicap, familial status, or national origin under the Fair Housing Act (“FHA”).  42 U.S.C. § 3604. Individuals’ social media profiles frequently highlight some of these protected characteristics.  According to a Carnegie Mellon study, between a tenth and a third of U.S. firms consult social media sites before making a hiring decision, and some job applicants were denied interviews on the basis of their affiliation with a protected category. The Wall Street Journal reports that in certain parts of the country, job applicants with dummy profiles reflecting a particular religion were more likely to be denied interviews compared to those with profiles reflecting another religion.

The Ninth Circuit previously addressed this issue in 2008.  Their interplay between the FHA and online companies came under judicial scrutiny.  See Fair Housing Council v., LLC, 521 F.3d 1157, 1166 (9th Cir. 2008).  The Ninth Circuit found that the website, which connects housing providers with tenants, was “designed to force subscribers to divulge protected characteristics and discriminatory preferences, and to match those who have rooms with those who are looking for rooms based on criteria that appear to be prohibited by the FHA.”  Id. at 1172.  Despite’s argument that it was not responsible for the information on the profile pages, the court ultimately held the website could be responsible for information its users posted that violated the FHA.

If Arizona real estate providers request access to a potential tenant’s social media profile it may be deemed an unlawful means to force a potential tenant to divulge protected characteristics and affiliations in violation as provided by the Ninth Circuit’s opinion.

Moreover, if housing providers examine tenants’ social media pages, the providers may become subject to state legislation.  As stated above, Arizona’s initial attempt to limit access to social media accounts failed, but many states, including California, already enacted laws limiting employer access to social media accounts of their employees.  California even extends these protections to college students.

On April 8, 2014, Wisconsin became the first state to take such restrictions even further and enact a law extending these restrictions to landlords.  Wisconsin Public Act 208 makes it unlawful for employers, educational institutions and landlords to request the passwords of job applicants’ and employees’ social media accounts.  Specifically, under the new law’s Section 995.55 (4), landlords may not require a tenant or prospective tenant to provide access to a social media account as a condition of tenancy.  Moreover, landlords may not discriminate against a tenant or prospective tenant who refuses to allow access or disclose access information to a social media account.

Though none of these laws affect publicly available information, housing providers, like educational institutions and employers, should still be cautious when viewing social media profiles because all three entities are covered by anti­discrimination fair housing laws.

Finally, considerations about the use of social media are also relevant to mortgage lending.  In keeping with the trend of alerting entities to avoid social media profiles, the Federal Deposit Insurance Corporation (FDIC) has issued guidance reminding lenders of the advantages and disadvantages of relying on information from social media to make decisions.  In its Financial Institution Letter, FIL-56-2013 (Dec. 11, 2013), the FDIC warns that creditors using social media should not request, collect, or use personal information, such as information disclosing an individual’s age and/or sex improperly when considering applications for mortgages.  Indeed, the FDIC notes that creditors must provide a detailed adverse action notice specifying the reasons for an adverse decision, and this requirement applies even where the information used to deny credit came from social media.  As it is unlawful for a mortgage lender to discriminate on the basis of race, color, national origin, religion, sex, familial status, or handicap under the Fair Housing Act, relying on social media to obtain such information could put a lender at risk of a violation.