When you find an apartment you like, the first step is to fill out a rental application which asks for sensitive information such as birthdate, social security number, bank account numbers and balances, credit card numbers and balances, and salary. All this information is needed for a housing provider to determine if you are financially qualified to pay the rent. Most application forms are similar. Housing providers generally belong to a property owner's assocation in that area which distribute such forms.
Application fees are a common part of renting an apartment. Renters prefer not to pay them and many owners do not charge them, but if the rental you want has the application fee, well, you'll just have to pay it. Usually the ones that charge it are property managers and agents who aren't going to recoup their costs from collecting rent. Don't apply for an apartment if you know there's a problem such as not having enough money, having bad credit, or having a pet when pets aren't allowed. It won't be a secret for long.
In California, there are several rules regarding application fees. For 2009, the maximum fee is $42 and it is only for out of pocket expenses associated with your application. Genearlly that means a credit check which usually costs around $10. Where does everything else go? You should ask. They can't charge you for an employee's time to do the credit check because that's not considered out of pocket.
You are entitled to an itemized receipt of all the expenses accrued in processing your application and you are entitled to a refund of the unused portion if it's less than what you paid. If a credit check was done, you are entitled to a copy of the complete credit report.