Tenant Fraud Running Rampant

by Chris on November 19, 2018

A newly-released study finds that over 80% of property management companies surveyed have experienced tenant fraud — as many as 20 times — in the past two years.

That staggering statistic is a key finding in the study conducted by Forrester Consulting on behalf of TransUnion credit bureau.

Tenant fraud, which comes in the form of fake identities, doctored documentation, and identity theft, leaves 95% of professional property managers scrambling to flag scammers, according to the study.

The Renter Who Doesn’t Exist

A major culprit, according to TransUnion, is the use of online rental applications. More than half of managers surveyed say that online-application fraud is a critical or near-critical issue. The anonymity of online applications allows for a variety of fraudulent schemes including:

Creating fictional identities. Once the person scores a rental, they use that address to build credit and run up credit card charges in the fake name before defaulting on rent. Obviously, it is difficult to collect rent from a person who does not exist;

Doctoring identification, credit cards, even IP addresses digitally. Left unverified, the scammer can bolster a fraudulent rental application; and,

Identify theft. Using bits and pieces of information, the fraudster piggybacks on someone else’s identity. When it comes time for rent collection, the renter’s true self remains a mystery.

The study reveals another disturbing trend: the bulk of these cases are discovered only after the fraudster moves in, and usually only after the person skips a rent payment. About one half of the scammers are exposed within the first six months, while 7% remain in the rental property for a year or more.

TransUnion estimates that the average out-of-pocket cost of fraud is $4,215. That does not account for lost rent, including over the three to five months on average that it takes to evict.

Vigilance is Key to Rental Fraud Prevention

Private landlords can be targets of fraudsters for the simple reason that these landlords may not take the time to run tenant background checks. But there is no reason that smaller landlord businesses can’t take steps to flag scammers:

Take your time when screening tenants. Allow the story to unravel. A vacancy is far less costly than renting to the wrong tenant;

Check a photo ID before providing a tour of the property. Unless it’s prohibited by local law, scan or copy the ID for later reference;

Deliver the rental application online only if you have met the applicant in person beforehand. Use your own vetted application form. Do not accept online rental applications from other sources like advertising platforms;

Verify the information on the rental application with third parties such as employers and previous landlords. Confirm that you and the references are talking about the same person;

Run credit reports — the content cannot be faked;

Run eviction and criminal history reports so you can cross-check for discrepancies. The more information obtained from objective sources, the more difficult it is to pull off the scam. Red flags include a young applicant with an extensive credit record, an older applicant with little credit, or an address that is not revealed on the rental application.

Pay attention to other discrepancies as well, like an applicant who drives a car not listed on the application, or information on a check that doesn’t add up.

Preventing fraud requires vigilance and TransUnion warns that flagging fraudsters before they move in may require transforming a landlord’s approach to property management by incorporating more fraud prevention techniques.

To learn more about the Forrester Fraud Study and fraud prevention, please click here.

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.

{ 1 comment… read it below or add one }

Marv November 21, 2018 at 12:08 pm

Thank you Chris for another great article.

Tenant fraud is becoming more and more common place. Landlords and property managers are required to effectively screen rent applicants with tools and smarts that are available to them. http://www.tenantverification.com will be adding more effective tools to the menu in the future. Meanwhile here are some Tips to help identify fraudster.
1.) As to see vehicle registration, do the name and address match to what is on the rent application. If no vehicle, why not? How do you get to work. Answer has to be reasonable.
2.) Ask to see a utility bill or cell phone bill. Name and address should match. If not why not? Oh…the cell and utility were in someone else’s name? Why? Oh you have poor credit, I see.
http://www.landlordfraud.com gives you valuable tips to help identify fraudsters.
Develop a checklist of the criteria, that every applicant needs to meet. That includes the Tips that are mentioned above.
Report rent payments to http://www.landlordcreditbureau.com after you have established the true identity of the applicant.
FOR THOSE LANDLORDS using Experian at http://www.tenantverification.com . The connect process that the tenant has to go thru to obtain his/her consumer credit report, identifies fraudsters. They will not be able to authenticate. Be wary of those tenants who can’t pass the authentication. These are multiple choice questions which everyone should be able to get right.

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