If your business hasn’t been affected by fraud, consider yourself lucky. Ninety-five percent of property management companies have experienced fraud in the past two years, according to a new Forrester study commissioned by TransUnion. Eighty percent have experienced it more than 20 times. It’s running rampant, and the growing preference for online application processes only adds to the problem.
So, even if you’ve managed to fall into that unaffected 5%, you may not be out of the woods. Those committing fraud are becoming more clever and sneakier by the day. If they come after your company, your reputation and revenue could be on the line. Staying informed can help, so keep reading to discover the three types of fraud most likely to impact your business.
This one’s probably most common for your business — and very easy to miss. It goes something like this: A person signs a lease but doesn’t intend to pay a dime in rent. Chances are, the person misrepresented or falsified information to indicate creditworthiness. Occasionally, applicants will have someone on “the inside” helping ensure they pass screening.
You hear about these cases every day. For example, a 43-year-old woman used a stolen identity to rent a $6,000-a-month apartment in New York City’s SoHo neighborhood with a false name, bank account, Social Security number, tax return, wage statements and other identifying financial information.
If someone presented that level of personal and confidential information, would you suspect something shady is going on? Maybe not — and that’s how people get away with it.
Once upon a time, identity thieves went dumpster diving to find details about people, or they preyed on people they knew. Now, they turn to the dark web to find information stolen during data breaches — which are up 45%. With a couple clicks of a button, they can find everything they need to steal someone else’s identity.
Given the patience required, it’s surprising instances of synthetic identity fraud have doubled since 2012. These perpetrators are playing the long game by creating new, fabricated identities — using a mix of real and fake data — to craft a credit profile.
Say they get their hands on a Social Security number (often that of a minor) and add fictitious details to complete an application. Then they’ll apply for a credit card, and although declined, the synthetic identity goes into the system. From there, they groom the identity for prime scores. For example, the synthetic identity can be designated as an authorized user on an accomplice’s credit card, and the credit score receives a boost as that card is kept in good standing.
It takes time, but eventually the fraudster builds up enough of a credit score — perhaps to gain approval for a rental under the new identity. They’ll live rent free for a bit, charge out their credit cards and then disappear. Because there are no third-party victims to report the fraud, it isn’t caught and stopped early enough, and creditors and landlords are left with little recourse to recover their losses.
How can property management companies combat fraud? It starts with a more thorough identity verification and credit screening process to look for red flags.
To gain more insight about how fraud is affecting the property management industry and to learn actions you can take to prevent fraud, watch our webinar, The Face of Fraud in Multi-Family and read Misunderstanding and Inconsistency: The State of Fraud in the Rental Housing Industry.