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Stephen White discusses the correct and legal process for denying a tenant applicant. He emphasizes the importance of following legal guidelines when making a decision based on background checks, including credit history, criminal records, evictions, and landlord references. When denying an applicant, it is essential to use an adverse action letter, a practice commonly employed in the credit industry. This approach helps ensure compliance with legal standards and provides a formal way to communicate the denial to the applicant. White highlights that even retail associates in stores like Macy's and JC Penney utilize this method when dealing with credit-related issues.