Application Fees & Caps: What You Can Charge, What You Must Refund, and How to Stay Compliant
Scope and why this guide matters
Application fees are small line items that create big legal risk. Cities and states set fee caps, define what costs can be passed on, and demand receipts, timing rules, and refunds if screening is never performed. This guide explains the compliance framework for U.S. housing application fees, with reusable “graphics” tables, checklists, and a plain-English legal base you can paste into your SOP.
Quick Guide (English)
- Know your cap: jurisdictions use four models—flat dollar cap, actual-cost cap, hybrid (whichever is less), or no fee allowed. Build your pricing to the strictest layer (city > county > state).
- Charge only when you screen: do not collect fees if the unit is already taken or if you will not run a report. Refund unused fees promptly.
- Disclose in writing: show what the fee covers (e.g., credit + criminal + eviction report). Provide a receipt.
- Process in order: where first-in-time rules apply, timestamp applications and run screening in queue to avoid steering or hidden waitlists.
- Vouchers & SOI: source-of-income protections mean no extra fees for voucher holders; calculate affordability on the tenant portion where required.
- Adverse action compliance: any denial or conditional approval based on a report requires the proper adverse-action notice package.
- Data hygiene: collect the minimum, retain securely, and delete on schedule—even if a fee was paid.
Key definitions
- Application fee: money collected during intake that is meant to cover screening and administrative processing for a specific unit.
- Screening fee: a subset devoted to consumer reports (credit, eviction, criminal). Often tied to an actual-cost rule.
- Holding deposit: money to hold a unit after approval. This is different from an application fee and is strictly regulated (write conditions, refund triggers, and conversion to security deposit).
- Fee cap: a legal maximum (flat dollar) or a rule that the fee must not exceed actual costs with proof.
How fees fit into a compliant screening workflow
- Publish criteria and fee terms with the listing: amount, what it covers, refund policy if screening is not performed, and any fee-cap citation.
- Collect consent to obtain consumer reports and verify identity/income; do this before any pull.
- Run screening only when the unit is genuinely available and the applicant is in queue.
- Invoice & receipt: itemize the components (e.g., CRA charge + ID verification + admin).
- Decision & notices: if denial or conditional approval relies on a report, send the required adverse-action notice(s) and log dates.
- Refund unused fees if no screening occurred or if law requires partial refund (e.g., app withdrawn before processing).
“Graphics” info — Regulatory models at a glance
| Model | What it means | Compliance tactics |
|---|---|---|
| Flat cap | Statute sets a dollar maximum (sometimes indexed annually). | Program your system with local tables; auto-adjust each January if an index applies. |
| Actual-cost cap | Fee must not exceed the documented cost of reports + reasonable processing. | Keep vendor invoices; itemize receipt; review costs quarterly. |
| Hybrid | You may charge actual cost or a flat cap, whichever is less. | Always choose the lower number; build a “whichever is less” rule into billing. |
| No fee | Some jurisdictions prohibit application fees entirely. | Set price to $0; consider absorbing screening costs as a marketing expense. |
What can be included in the fee?
- Usually allowed: third-party CRA invoice (credit/eviction/criminal), identity verification, and modest administrative processing directly tied to screening the applicant for a specific unit.
- Often disallowed: general overhead, profit markups, broker commissions, or platform subscription charges that don’t vary by applicant.
- Pro tip: in actual-cost regimes, maintain a binder (digital) with vendor price sheets, monthly invoices, and a one-page cost methodology for auditors.
Receipts, refunds, and recordkeeping
- Applicant name(s), unit address, date/time stamp.
- Line items (credit report, criminal check, eviction search, ID verification, admin) and the cap rule used.
- Refund trigger statement: “If no screening is performed, this fee will be refunded within [X] days by [method].”
Refund scenarios matrix
| Scenario | Refund? | Notes |
|---|---|---|
| Unit already leased; no screening run | Yes (full) | Return immediately; apologize; offer to re-apply at no cost for next vacancy. |
| Applicant withdraws before screening | Often Yes (full) | Follow local rule; if allowed to keep a small admin cost, disclose that up front. |
| Screening completed | No (generally) | Unless a statute provides otherwise or the report was never used due to provider error. |
| Provider cancels after screening due to internal mistake | Consider partial/whole refund | Goodwill + risk reduction; document the reason. |
Fair housing and disparate-impact risk
Application fees can create barriers for protected groups, especially when charged repeatedly for waitlisted or unavailable units. To lower risk:
- Charge only in good faith for available units being actively screened.
- Waive or refund duplicate fees when you re-use a recent report for the same applicant (with consent and where allowed).
- Never set different fee amounts for voucher holders or families with children; this may be source-of-income or familial-status discrimination.
Multiple applicants & co-signers
Where law permits, you may charge per adult applicant when each requires a separate report. Disclose the per-person fee clearly. If only a co-signer requires screening, charge only for the additional report. Consider a cap for large households to avoid excessive totals and perception of padding.
Payment methods, surcharges, and chargebacks
- Payment type: accept electronic payments with itemized digital receipts. Cash is disfavored; if used, provide a pre-numbered receipt and secure lockbox procedures.
- Surcharges: some jurisdictions limit or ban credit-card surcharges for fees; build the processing cost into your capped amount rather than adding a separate line.
- Chargebacks: keep signed authorizations, consent to screening, proof of reports ordered, and time-stamped correspondence.
“Graphics” info — Fee components checklist
- ☑ CRA invoice(s) (credit/eviction/criminal)
- ☑ Identity/SSN verification service
- ☑ Reasonable admin labor (documented minutes × internal rate)
- ☑ Receipt and statutory disclosures
- ☑ Refund logic if no screening is performed
Interactions with other compliance duties
First-in-time and queue rules
When required, process applications in chronological order. Timestamps and an auditable queue prevent both steering and duplicate fees for non-screened applicants.
Criminal-history “fair chance” laws
If your locality delays criminal checks until after preliminary qualification, split the fee (or collect once and run components in sequence) so you do not charge for restricted checks before the allowed step.
Privacy & data minimization
Even when a fee is paid, collect only what is necessary (identity, income, rental history). Do not stockpile documents “just in case.” Securely destroy data at end of retention.
FAQ (English)
1) Can I keep the fee if I never ran the report?
Generally no. Most regimes expect a full refund when no screening is performed or when the unit was not truly available.
2) Can I add a platform or “technology” fee on top?
Often no—especially under actual-cost caps. Fold payment processing and platform expenses into your administrative line only if expressly allowed and documented.
3) Are application fees taxable?
Usually not as sales tax, but consult your accountant for state/local tax treatment. Always itemize fees separate from rent or deposits.
4) Can I charge a new fee if an applicant reapplies within 30 days?
Best practice is to reuse recent reports with the applicant’s consent if allowed by your vendor agreement and law. If re-screening is needed, disclose the reason and any incremental cost.
5) May I charge different fees for premium units?
Fee caps apply per applicant, not per unit price. Avoid tiered fees that could appear discriminatory.
6) What if my CRA bundles multiple reports for one price?
List the bundle as one line item and keep the vendor invoice. Do not add a separate “criminal check” fee if it is already included.
7) Can I keep a “processing” portion after withdrawal?
Some jurisdictions permit a nominal admin amount if you actually expended time before withdrawal—others require a full refund. Disclose the rule up front and follow the stricter local standard.
8) Are fees different for voucher holders?
The amount should be the same. Charging higher fees to voucher holders can violate source-of-income protections.
9) Can I collect one fee for an entire household?
Where law allows, yes—especially if you use a single joint report. If you charge per adult, explain why (separate reports) and consider a household cap to avoid excess totals.
10) Do I need to post the fee in the listing?
Posting increases transparency and reduces disputes. Some jurisdictions require advance disclosure and a written receipt.
Technical/legal foundation (plain-English)
- Consumer-reporting framework: using tenant/credit/criminal reports triggers consent and adverse-action duties; fees tied to these reports must reflect permissible, disclosed screening activities.
- State/local landlord-tenant statutes: set fee caps, actual-cost limits, required receipts, refund rules when no screening occurs, and sometimes annual indexing of caps.
- Fair housing: disparate-impact and disparate-treatment principles apply to fee practices; source-of-income provisions bar extra charges for voucher holders.
- First-in-time / fair-chance housing: may control the order of processing and the timing of criminal checks, affecting when and how you may charge fees.
- Privacy & disposal: data-minimization, retention schedules, and secure destruction apply to application files regardless of fee status.
Conclusion
A compliant application-fee policy is simple: charge only what the law allows, collect only when you intend to screen, itemize and receipt, refund when screening does not occur, and treat every household consistently. Combine those steps with a clear queue, accurate notices, and tight recordkeeping, and you will reduce disputes while keeping access to housing fair and transparent.