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In ordinary words.
Pay money to be told you can't pay rent there.
In legal terms.
State and local laws may cap, restrict or require refunds of screening fees.
Where it stops being legal.
This practice is not categorically legal. Applicable federal, state and local laws, disclosures, procedural protections and the specific facts can make particular conduct unlawful.
General U.S.-focused information. Cases and statutes may have jurisdiction-specific exceptions. This citation may be a general primer; verify the governing primary authority. Not legal advice.