How much is fraud costing you? It could be more than you think ― especially in the aftermath of COVID-19. The sudden fallout of the economy meant major life-changing events like job losses for millions of Americans. To put the number in perspective, during the Great Recession more than 8 million people lost their jobs. The jobs lost during the pandemic are double that.1
In addition, social distancing forced many property managers to stop in-person leasing operations. All applications had to be moved online. As a result, online applications often outpace those that are submitted in-person.
Fraudsters seized the opportunity to focus on digital fraud, finding new and more sophisticated techniques to be approved for a rental.
Many owners and operators are left scrambling to keep up with demand while also thwarting more fraud attempts than ever before.
How big is the problem? According to the TransUnion report, Fraud in the Multifamily Industry:
- Nearly 65% of owners and operators experienced up to 100 instances of fraud in their portfolio in 2020
- More than 40% didn’t identify the fraud until after the applicant moved in.
The hidden costs of fraud
Fraud running rampant results in an extreme hit to revenue and NOI (net operating income). But there are hidden costs that often get overlooked, such as:
- Lengthy and costly eviction processes
- Legal costs
- Increased vacancy costs
- Property damage
- Loss of reputation and renter satisfaction
Common rental fraud schemes
Owners and operators are susceptible to many different types of fraud.
- First-party fraud: Getting permission to use another person’s identity, like family or a friend
- Third-party fraud: Stealing another person’s personal details without their knowledge
- Synthetic identity fraud: Fabricating an identity by piecing together data from multiple unsuspecting victims to create an identity that doesn’t exist
In all of these cases, the fraud could have been spotted before the applicants moved in, saving thousands or even millions in eviction costs. But too many property managers operate in reactive mode.
Arm your properties to mitigate risk
Owners and operators are finding themselves in need of more powerful identification-verification technology that mitigates risk. The first place to start is to use identification-verification and fraud-detection models built specifically for the multifamily industry. Generic identification systems use credit checks alone to measure an applicant’s credit risk, but they don’t assess risk of rental fraud.
A multifamily solution shows attributes that matter most to predict rental risk. This model flags fraud at the first warning sign. A single layer of defense isn’t enough.
Using multiple layers of identity authentication and data-driven defensives helps detect fraud before it happens.
- Identity verification: Confirm an applicant’s identity against credit, non-credit and device data to expose fraud risk
- Authentication: Validate applicants by sending a one-time passcode or knowledge-based verification questions to ensure the device is linked to the applicant
- Device risk: Proactively identify suspicious applicants and fraudulent devices in real time using insights on billions of transactions and millions of devices
There’s more information in our insight guide
You’ll find additional tips and solutions to your rental fraud challenges in the TransUnion insight guide: “Are Your Applicants Who They Say They Are? Stop Fraud BEFORE it Happens.” Download your copy today.