The rental industry is experiencing a significant rise in fraud activity among applicants, that according to a new fraud analysis from TransUnion Credit Bureau. During the period from March 2020 to August 2020, landlords saw a nearly 30% increase in applicants who failed authentication or were identified as high risk. In August 2020, fraud triggers were identified in roughly 15% of applications.
In a related TransUnion survey from September, property managers reported a 48% increase in fraud incidents. Another 26% experienced up to 100 instances of fraud in their portfolio in the past year. Over 40% of landlords failed to identify the fraud until after the applicant moved in.
All of this has landlords on high alert when it comes to screening tenants. Maitri Johnson, vice president of TransUnion’s tenant and employment business explains, “Fraud continues to be an increasingly concerning issue in the multifamily industry for the last several years and the COVID-19 pandemic driven shift to virtual leasing has pushed this concern to the forefront for property managers. It is imperative that management companies take the necessary precautions and protect their business against the economic impacts brought on by the current environment, as well as the increased propensity for fraud that may not be easily evident today.”
Fortunately, landlords have powerful tools available to detect fraud early, before it causes income loss. One such solution is TransUnion’s ResidentID®, which verifies identity and detects potential tenant fraud without slowing down the approval process. The COO of one major property management company reports that TransUnion’s ResidentID® has flagged hundreds of high-risk applicants, including those who were unable to answer personal identification questions needed for a credit check.
But major property management companies are not the only ones susceptible to tenant fraud. In fact, small landlord businesses are as or more likely to be targeted because of the perception that they will be less skilled in detecting problem tenants. Small landlords may not have the financial resources of larger companies, but that does not mean these landlords cannot employ the same fraud-prevention strategies:
Avoid leasing on third-party platforms or with online applications. These make easy work of falsifying qualifications. Before providing the application, a landlord must verify the individual’s identity. Even with COVID-19 restrictions, it still is possible to view a photo ID and match it to the applicant’s face — even if that takes place digitally.
Advertise that the landlord requires a tenant background check. Problem tenants are less likely to apply, reducing the risk of renting to one.
Warn applicants in advance that misstating or omitting facts on a rental application is fraud.
Include a declaration statement in the rental application attesting to the accuracy and truthfulness of the information provided.
Reject incomplete applications. Do not accept applicants who are refusing to provide material information.
Review supplemental documentation, particularly income verification. It is much easier to assert false qualifications on a rental application than it is to produce fraudulent pay stubs, and the request may discourage a fraudster from pursuing the application.
Check the applicant’s references to verify the person’s rental history.
Run tenant credit as a last step. If the applicant is otherwise qualified after checking references and verifying the rental application, run a tenant credit check to catch identity theft, overstated income, or bad credit history.
This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).
Click Here to Receive Landlord Credit Reports.
Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.