Would you pass the KFC Test?

If you had to choose between KFC or your next rental – what would it be?

With buckets full of KFC advertising gracing billboards and TV intermissions during the holiday season, it’s hard for the average Kiwi to avoid the charms of Colonel Sanders.
But, what if a visit to his house cost you your own?

When you’re licking your fingers post chicken wing feast thinking that finding napkins is your biggest worry in the world, are you aware that your summertime snack could have just cost you a roof over your head?

Well I hate to say it but it really could. Not necessarily should, but it could.

What has been referred to as the ‘KFC test’ is something many tenants are subject to when applying for a new home. Although your tenancy application doesn’t ask for your full name, date of birth, and KFC order, the summoning of bank account statements by some owners and property managers has led to decisions being made based on where you spend your money and how often. Here’s all you need to know about the ‘KFC test’ and what to do if you find yourself taking it.

And if you’re a landlord looking to see what other options to take when trying to work out whether your tenant is the right tenant, scroll to the bottom!

What is the ‘KFC test’?

The ‘KFC test’ is a term that describes a situation where landlords or property managers deny people’s tenancy applications if they see KFC purchases on their bank statement.

This was first brought to the attention of the New Zealand Government in 2018 when property manager Rachel Kann told a select committee that she looked at spending habits to determine whether tenants would be able to pay rent.

A recording of Kann describing this can be heard here.

Why is a property manager looking at a tenant’s private banking details?

Although there was some public outcry toward Kann’s tenant vetting processes, the lack of regulation around property management means it wasn’t completely illegal.

In fact, there are still no regulations for the property management industry and although some companies are calling for this to change in 2020 it still means the only thing saving you from the ‘KFC test’ are guidelines written by the Privacy Commission (we’ll come back to these).

Except, are owners and property managers even qualified in giving out budgeting advice? Some people think that they know best when it comes to other people’s finances, and if they aren’t on the same page with their values and attitude to money, they might see this as a negative. 

‘I see a lot of people who are low socio-economic and their bank statements literally will read, ‘KFC, McDonalds, the dairy, KFC, McDonalds, court fine’, trucks that they buy, goods that they can’t afford. You know, I see a lot of mismanagement of money.’

Literally that’s two feeds of K-Fri and you’re out, not even a three strike rule applies here. In summary, if you have multiple transactions on your bank statement for KFC you fail the ‘KFC test’. If you were looking to secure a tenancy on the house that this property manager has listed, you’re now out of luck.

What a landlord can ask for?

A landlord should try to collect the smallest amount of personal information needed to complete a task. The Privacy Commission outlines all of this information in this document and a bank statement is not one of them. Some things include:

• Name and contact information
• Proof of identity
• Consent for a credit report
• Pet ownership
• Smoking

However, there is no mention that a bank statement is required with the Privacy commissions stating: “If a credit report shows that an applicant is creditworthy, there’s no need to collect their bank statements.”

Will someone’s bank statements give you an accurate picture of how good they are at paying rent?

Think about how many transactions you are making every day. Scrolling through your bank statements can take a while. Buying lunch and coffee, weekly insurance payments, monthly donations, Trade Me fees, work purchases; does a potential Landlord really need to see all this information?

No they don’t. What people spend their pay on does not give an accurate picture of how good they are at paying rent. So what evidence is there to support this property manager’s claim that people who eat fried chicken can’t pay their bills? There is none, their claim is completely subjective.

Should we be penalising people for eating KFC when it’s a cheaper meal than avocado on toast? There are much worse things that people could be spending their pay on, that won’t show on a bank statement. 

What can a landlord use as a fair assessment of someone’s ability to pay their bills?

Thankfully for tenants and landlords, there are several options available that don’t involve reading personal documents. One of them is to use a credit checking agency.

These agencies are professional services that look at a person’s credit history. They are pro-consumer and are a legal and ethical way of doing a background check. Credit checks don’t discriminate and they are not breaching anyone’s privacy.

To find out where you can complete a credit check on your tenant see this article. It will talk you through your different options and describe the information that each service will provide. Remember: Before you conduct the check you need to get your tenant’s permission first!

What can a tenant do if they’re subject to the ‘KFC test’?

The rental market is tight, and it’s getting harder for people to secure a property every year. Renters can feel vulnerable, who wouldn’t with the threat of being homeless looming over your head? You’ll do whatever it takes to make sure your family has a place to call home. Sometimes for vulnerable people this includes giving in to unreasonable requests for their personal information.

With some properties this Summer already attracting over 80 inquiries within two days, landlords have the luxury of choosing between many different applicants for their home but it doesn’t mean they should employ this method.

If you’re a tenant that has been asked for copies of your bank account statement, this article is a great resource that talks you through your options.

Remember you do have options even if it is simply providing a redacted bank statement or conducting your own credit check.

Are people wrong to want to feel secure letting someone live in their house?

The New Zealand homeownership rate is currently 64.29%, projected to fall to 62.6% in 2020. This means fewer owner-occupied homes and more people renting. As the number of Kiwis renting increases, there need to be better systems in place that protect both the privacy of tenants and the interests of the homeowner.

Working and saving for a home deposit can take years. The average house price in Auckland is 9 times that of the average wage. With the potential to lose out on unpaid rent and damages to property, landlords are resorting to different means to get peace of mind on who they are letting live in their homes.  

Insurance is one way to protect yourself from these sort of events but a bank statement is sadly not going to save you. Many insurance companies already require tenant checks anyway so you might as well go for the option that is a: legal and b: moral and c: required.

For the price of a quarter pack you can do a basic background check. Upgrade that to two buckets and four large sides you can get yourself the most comprehensive background check available.

Renters, make sure you know your rights around what sort of information you need to provide a potential landlord. 

Landlords, make sure you cover your insurance obligations and use ethical means of screening your tenants.