Transunion, one of the “big three” U.S. credit reporting agencies and a self-described “sophisticated, global risk information provider” recently released highlights of a study suggesting that most U.S. property managers have trouble identifying, mitigating and preventing rental fraud in the single and multi-family rental industries.
According to Transunion’s news release, the commissioned study by Forrester Consulting found that 80 percent of surveyed decision makers at property management companies have experienced fraud up to 20 times within the past two years “but due to the emerging nature of the problem, … are not well equipped to manage the issue.”
The study is based on an online survey of 153 U.S. single and multi-family property management organizations and their decision makers. The study was completed in August 2018 and found that nearly 59 percent of rental applications are submitted online and are a primary driver of rental housing industry fraud. And, according to the news release, more than half of the surveyed companies “identified online applicant-based fraud as a critical or near critical issue.”
Transunion says that property managers need to be more aware of the key forms of rental application fraud currently taking place:
• “Synthetic fraud”, “a new weapon of choice for sophisticated fraudsters” involves manufactured rental applicant identities. If the application is approved,the scammer uses the address to establish credit and run up high balances under the false identity. Property managers are stuck with a non-existent tenant from whom rent cannot be collected.
• “Digital fraud”, which is increasing due to the use of manufactured identities, often involves “backroom operations” that run identity and credit cards to find a potential “match,” using spoofed IP addresses to indicate that the rental applicant is local.
• “True name fraud” involves scammers who obtain and use stolen pieces of otherwise valid identity information (name, date of birth, social security number) for a rental application which, if approved, leaves the property manager at risk and the identity theft victim potentially “on the hook for an apartment they never applied for.”
According to the study, “95% of property managers admitted to experiencing difficulties identifying, mitigating or preventing fraud. A significant problem that was acknowledged was the time frame in which the incidence of fraud was first recognized. Three out of four property managers identified fraud after move-in, with more than one-quarter discovering the fraud much later into their lease—seven months or later.”
Mike Doherty, Senior Vice President in TransUnion’s rental screening business commented, “In all of these cases of fraud, a property manager will find that the resident they may try to evict does not actually exist or is not the person in their rental unit. As a result, the property management company can lose thousands of dollars of potential income and impact their hard-earned reputation.” Transunion also said that these sorts of rental application fraud “can quickly become an expensive problem” and that “It can take anywhere from 90–150 days to evict a tenant, and additional expenses such as lost rent, back rent, and leasing and marketing costs can also pile up.”
[Source: Transunion news release: “Fraud: The New Operational Headache in Property Management.” Note: Transunion offers several identity theft and fraud detection and prevention products and services. ARELLO does not endorse any particular products or services or warrant their effectiveness, suitability for a particular purpose, or compliance or non-compliance with any applicable laws.-Ed.]
© ARELLO®. Reprinted courtesy of ARELLO’s Boundaries magazine.