Identify theft and rental fraud always increases when money is tight
Just as tempers flare when temperatures rise, identity theft and rental fraud increases when money is scarce. The economic crisis caused by COVID-19 pandemic proves this point, according to Texas-based technology firm RealPage.
Recently, RealPage hosted a free webcast, COVID-19: Impact on Risk, Evictions and Screening. Several industry experts shared their insights on the damage that rental fraud causes and what steps can be taken to reduce the risk during these unprecedented times.
Matt Davis, RealPage’s senior vice president/general manager of financial services, noted that the Federal Trade Commission issued a report on fraud last year, and the agency found that the fraud industry is now $1.7 billion annually. Of that, there was a 56% increase just within the rental properties industry.
“This analysis was done prior to the recession that has just begun,” Davis noted. “So, I would expect from my experience that 2020 is going to be a 200% increase over last year. And then we'll have to see what happens in 2021. But the biggest challenge, now that the criminals have pivoted to this industry, is that they're here, and they're coming, and so we've got to take more aggressive action against renter ID theft.”
“The biggest challenge, now that the criminals have pivoted to this industry, is that they're here, and they're coming, and so we've got to take more aggressive action against renter ID theft,” said Matt Davis, senior vice president/general manager of financial services for RealPage.
Indeed, assumed identities are becoming more of the norm, and the risk is enormous, according to Robin Fluharty, implementation and compliance manager for Pegasus Residential, who participated in the webcast.
“For our industry, we're talking about lost rent revenue, damage and repair, legal costs and the time that the unit is out of the market during which we're not capturing that revenue,” Fluharty said. “We need to stop the perpetrators of fraud before they gain their way into an apartment community.”
Experts warn that property managers need to be extra cautious about whom they allow to move in right now. Many state and local governments across the country have responded to COVID-19 with eviction moratoriums, which creates greater uncertainty as to whether communities will be able to get them out.
So Many Ways to Perpetuate Rent Fraud
Rooting out identity thieves also has become more difficult because there are now so many ways available to perpetrate rent fraud, experts note.
For example, illegitimate pay stubs are an increasingly popular technique used in fraudulent lease applications because there are websites that can create falsified pay stubs that look completely legitimate. A user can enter the name of any company they wish to claim they are employed by and any salary they want to show, and the pay stub looks correct.
The good news is that property owners and managers can access the tools they need to combat rent fraud.
For example, Bryan Davis, IT manager at CF Real Estate Services, has been using RealPage Identity Verification for about five quarters now. "Just since using it, we have probably saved between $155,000 to about $300,000 in bad debt write-offs," he said. "Those kinds of residents typically rack up between $5,000, maybe even up to $10,000 worth of bad debt between their rents, their damages, and other ancillary charges.”
Other owners are choosing a new line of defense: artificial intelligence. RealPage's AI Screening program, for example, is a first-of-its-kind multifamily screening solution that predicts not just an applicant’s ability to pay rent but also their willingness to pay.
Read more about rent fraud at RealPage.
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