The COVID-19 pandemic brought about a significant shift in the rental industry. Property managers across the U.S. adopted contactless methods of leasing apartments and buildings by using online platforms. Most prospective tenants use these platforms and send in their rental applications online. However, this has also led to an increase in rental fraud. TransUnion, a credit reporting agency, reported a 30% jump in rental fraud warnings during the COVID-19 pandemic between March and August 2020.
It's all well and good to say that rental scams have become more prevalent since the rental industry went digital. But what are the different types of rental frauds? And what can we do to mitigate and minimize the damage they cause? Let's discuss how to identify and protect yourself against fraud in the rental industry.
First party fraud is when someone takes on a financial obligation like a loan with no intention of paying the money back. How does this work with rental scams? The fraudster misrepresents and falsifies documents to improve their credit score.
ID-theft fraud (also called third party fraud) occurs when identities are stolen from the dark web. Identity thieves often use data breaches to gain access to sensitive information. Otherwise, it could be supplied to them by a third party. This is one of the most common rental scams.
Fraudsters usually steal information like:
Fraudsters who have low credit use this method to get a new credit history to scam property managers.
Fraudsters can also commit rental fraud using synthetic or fabricated identities. Scamsters purposely create these fabricated identities with a mix of real and falsified data to make them look like a real person. This way, there are no third party victims who can report the fraud. However, to property managers, these fabricated identities can look like real people with good credit scores.
Because these synthetic identities look so genuine, it can be difficult for property managers to spot this type of scam. Since 2012, property managers have lost approximately $1 billion to synthetic identity frauds.
To tackle rental frauds, it's essential for property managers to know when they occur, so they can be vigilant and prevent losses. Most property managers experience fraud after renters move in. Only half of all victims manage to identify fraud at the time of the application. This means that a significant number of property managers fail to recognize fraud when they see it, leading to losses which could be prevented if they had known the signs.
Property managers suffer lasting consequences as a result of these rental scams. The most significant financial blow comes from the loss of reputation. They also have a higher rate of tenant turnover and find themselves spending more time screening applications in the future.
Detecting and preventing rental fraud early can help you prevent financial losses. Here are some sure fire ways to avoid rental scams:
No technology can guarantee you 100% protection from rental fraud. The most efficient way to protect yourself from rental scams is by being proactive and aware, and by taking timely action.