As a property manager, you’re familiar with how widespread identity fraud is and how rental scams can affect your business — and the lives of the landlords you serve. We’ll discuss the four types of rental fraud and how to spot the red flags, prevent them, and respond to fraudulent rental applications.
Let’s break ground. Potential tenant frauds are unfortunately extremely prevalent during the application process. But how often does that mean they turn up?
Between 2016-2018, 97% of property managers experienced fraud—80% experienced it up to 20 times. During COVID-19, fraud reached a high of 15% compared to 10.3% over the same period in 2019. This led to:
- 51% increase in evictions
- 35% increase in financial losses
- 22% increase in bad landlord debts.
In short: it’s a nasty plague that causes serious harm to our industry. To help keep you from dealing with these fraudsters, Snappt has compiled a comprehensive overview of how to identify red flags when they pop up and how to avoid them. To start, below are the four most common types of fraud out there—synthetic fraud being the one you should focus on.
The 4 types of identity fraud
First-person fraudThis means a person will act out the process of renting from you, while in truth, they do it for a different person. It means they will be who they claim they are, using their real identity, but lying about who will be staying on the property. They might even pay the rent. Most commonly, it’s a family member or a close friend helping out, but it can get worse: double renting or publishing on Craigslist or Airbnb.
Third-party fraudThis fraud involves a prospective renter who stole a credit card, ID, contact information like a phone number, and SSN information. In layman’s terms; Identity Theft. A real classic. Meeting the potential renter in person, along with an extensive background check, should help eliminate this risk upfront.
Identity-manipulation fraudLess suspicious in nature, this is a favorite among criminals, since it may look like a mistake. This type of fraud involves altering a few digits in the ID or SSN, maybe some transposed numbers, altered names/birthdays, and even places of birth.
This involves your applicant fabricating everything, including their name, DOB, and SSN. The most common strategy is weaving together information from several stolen sources—a child’s SSN, a deceased person’s DOB, and so on.
While this may appear as the most far-fetched of all four types — it’s the most common because it’s difficult to identify during the leasing process — making it the fastest-growing type of identity fraud, with 50% of Americans being victims of such acts in 2022.
Responding to fraudulent activity
Before talking about solutions, we recommend you hire lawyers specializing in the tenant screening field, and have them craft an iron-clad template you can re-use when you indeed detect fraudulent applicants. This will protect you if a mistake is made on your end.
Competent lawyers in the field should gravitate toward templates that don’t reveal to the scammer that you’re onto something. Furthermore, the denial letter they help produce should be enforceable at the federal level and within your state, county, gov, and municipality levels.
And, of course, never let your staff confront suspicious prospects, and stay within FHA guidelines when asking for additional United States government-issued identification.
Solutions that work
With our backs covered, let’s talk solutions.
This is a given, but if you still collect income and employment information manually, switch to automated systems as they eliminate human error on your end.
Then, employ additional screening steps to tie people with the physical devices (computers, tablets, smartphones) they used to fill the application. A common method is using the Google Authenticator, Authy app, and SMS to generate one-time passcodes. Airbnb, Robinhood, and Tinder, which are highly susceptible to identity fraud crime, use this method.
But with the alarming facts presented at the beginning and how billions were stolen in crypto using identity fraud in recent years, no easy solutions are available. That’s why fighting tech-savvy criminals with bleeding-edge tools is what we do. Desperate times call for desperate measures, and we employ weapons of our own to stop criminals, legally.