03/27/2024
Blog
While the digital revolution has undoubtedly transformed the rental market landscape, making the application process more convenient for property managers and applicants, it’s also opened the door to potential fraudsters.
A TransUnion 2023 year-end survey of property managers revealed some alarming statistics: 60% have fallen victim to fraud in the last two years — with altered documentation being the primary challenge for 84% of respondents.
This blog explores the impact of online rental fraud, common methods used by potential fraudsters and actionable steps you can take to help enhance prevention.
The impact of online rental fraud
When we surveyed property managers, 43% spent more time comparing applications for discrepancies, 38% faced increased evictions, and 27% incurred more bad debt and higher financial losses .
Surprisingly, 33% of property managers said they currently don’t use formal tools, relying solely on manual screening. This may create vulnerability for fraudsters to exploit and slip through the cracks undetected.
Types of fraud
Understanding the types of tactics used by potential fraudsters is critical to fortifying defenses.
1) First-party fraud
Using another person’s identity with their knowledge and/or permission. For example, an applicant might have bad credit and skipped from a prior lease. To hide this negative information, they’ll use a friend’s identity who has high wages and a stellar rental history.
2) Third-party fraud
Stealing an identify from an unsuspecting victim without their permission. Third-party fraudsters present legitimate bank statements and wage documents using identities stolen from victims.
3) Synthetic identify
Stealing more than one identity to nurture and create a new one. In this type of fraud, criminals fabricate an identity using data from multiple individuals, piecing together a mix of stolen identities and fake data over time to build a new, phony identity.
Proactive fraud mitigation strategies
To spot potential fraudulent activities before applicants move in, be sure you have proper preventative measures in place.
One key step is to understand the differences between the screening process and true fraud mitigation.
Fraud mitigation goes beyond automating background checks and credit scores. That’s because credit scores measure an individual’s credit risk, but they don't assess rental fraud risk.
TruValidate™ Resident ID, our fraud mitigation solutions built specifically for the multifamily industry, analyzes data points important to helping predict fraud, including financial history, past evictions, and foreclosures. You’ll have access to the information to help predict the likelihood of fraudulent activity. This may also reduce performing manual checks, helping enhance efficiencies and streamline the application process.
To proactively help identify fraudsters during the application process, use multiple layers of security with a three-pronged approach to fraud mitigation.
1) Identity confirmation: Verify applicants against credit, non-credit and historical information to establish more robust understandings of applicants and their potential levels of risk.
2) Authentication: Send a one-time passcode or knowledge-based question is sent to the device, helping ensure the applicant is who they say they are.
3) Device risk: Use data on millions of devices from a database to identify potentially fraudulent devices in real time.
Take action to mitigate risk
With the proper tools, you can approve the right renters and close the door on fraudsters, thus helping reduce the risk of future evictions and financial losses.
Next steps
In an era where online rental applications dominate, property managers must stay vigilant against the rising threat of fraud. Find out more about Resident ID, fraud prevention tools to help safeguard your business and promote informed decisions about potential tenants.
For more information, read the insight guide.