More personal information about consumers is ‘freely’ available to view or purchase online today than ever before. It doesn’t take a rocket scientist to know that with the abundance of data available nowadays, the incidence of fraud increases. Now more than ever, property management companies need to protect its data and one way to do this is through identity verification.
One major trend in multifamily is more and more online applications. This practice presents an opportunity for applicants to deceive. Someone submitting information electronically not only has a wealth of potentially fraudulent information at their fingertips during the process but falsifying documents can go virtually unnoticed even if submitted in the leasing office.
James Hilliard, vice president and general manager of RealPage Screening, recalls following one individual who applied for four apartments at two property management companies and used different names, addresses, social security numbers and date of birth each time.
“She nearly succeeded moving in, if not for a switched-on leasing agent working with our screening operations team,” Hilliard said. “We discovered a litany of evictions and other criminal activity associated with the same applicant.”
‘Bad actors’ exploiting weaknesses in online application processes
Increasing use of the online application processes combined with the power of electronic devices like smart phones and tablets are altering multifamily’s entrance hall. Savvy consumers and bad actors are exploiting points of weakness using widely available personal data and falsifying information.
Ultimately, it’s the apartment operators who pay for accepting a fraudulent application and allowing a move-in. The property typically gets stuck with bad debt in the form of unpaid rent once the resident has defected or has to go through the uncomfortable eviction process that leaves a scar on the community. This is why it’s so important to have a process, like identity verification, in place to nip these problems in the bud.
Hilliard said that application fraud is increasing at an alarming rate.
“Last year we heard statistics from our clients that the issue was in the mid-single digit percentages across their entire portfolios,” he said. “This year, as early as February, we are hearing this is growing to double-digit figures at some locations.”
Synthetic identity is a newcomer in growing identity-fraud problem
The bad actors are career specialists in avoiding detection by modifying each application. Some are smart enough to create a synthetic identify with credit bureaus so it appears a person actually exists, Hilliard said.
Rather than stealing an identity, thieves create a fake identity using a mix of social security numbers, phone numbers, addresses and birthdates and other personal information. The new identity appears to financial organizations as a real person.
Synthetic identity thefts are adding to a growing number of complex identify-fraud schemes that have cost billions of dollars in bad debt in the U.S. Identity-fraud losses reached a record $16.8 billion last year (8 percent over 2016), according to Javelin Strategy & Research. The Wall Street Journal recently reported that synthetic identity losses are climbing, although they are a small piece of the overall identity-fraud epidemic. One financial firm notes that credit card debt by people who don’t exist has become a trend.
In multifamily, the scheme leaves property managers wondering who they are really dealing with, Hilliard said.
“The pristine look and feel of the person makes it very difficult to detect who is real and who is fake.”
A great synthetic identity, he added, is a thin file, or someone who looks like a credit newcomer. Applicants who appear to be newly arrived citizens from other countries and others who don’t have much of a banking track record fit the profile.
And nobody is immune. Another trend is that fraudulent transactions are rife in offline channels. A big reason is that it takes time for perpetrators to get caught. Usually, the resident gets behind on rent and the property is forced to begin eviction proceedings – all at a big cost.
In the end, the property is left holding the bag when an unworthy applicant successfully outsmarts the leasing process.
Identity verification solution effective in detecting discrepancies
The only way that property managers can minimize the risk, Hilliard said, is to be diligent about employing a screening platform capable of extensive background checks. The screening solution should include a fraud protection program that encompasses identity verification, validation and risk detection processes that instantly verify consumer identities when the application process starts. It’s there that properties have the best chance to spot potential fraud or identity theft by automatically flagging discrepancies in either online or in-office applications.
RealPage Resident Screening works as quickly as the applicant fills out the online forms. If discrepancies in the information are detected in the identity verification process, applicants aren’t allowed to go to the next step until resolving the issue.
Even a basic screening solution is a start, Hilliard says. But doing nothing ultimately exposes the property to not only lost rents but legal fees and damaged brand reputation. The last thing a property wants is the sheriff’s department hauling off someone who commits fraud when it can be avoided.
“Identity verification is good for your community health,” he said. “It’s time properties stopped playing a guessing game with lease applications.”
Learn more about RealPage Resident Screening.