A new report from TransUnion examines the dangers of rent applicant fraud.

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Another report is shedding light on increased fraud in the multifamily industry. According to new research from TransUnion’s tenant and employment screening business, 6 out of 10 property managers have experienced fraud in the past two years.

More concerning, according to TransUnion, is that 38% of property managers didn’t identify the fraud until after the applicant moved into their new rental. In addition, 49% reported applicant-based fraud to be an issue for their companies.

“Once fraudsters become residents, the dangers and damages only compound,” said Maitri Johnson, senior vice president of TransUnion’s tenant and employment screening business. “Delinquencies and evictions are expensive and take significant time and effort to enact. In the meantime, the other residents might be at risk with fraudsters nearby.”

TransUnion’s research, which is based on an online survey of 98 property managers in October and November, also found that fraud is hitting companies hard, with 43% saying more time is being spent on comparing rental applications to find discrepancies. In addition, 38% cited more evictions, and 27% reported increased bad debt as well as increased financial loss.

The most common triggers that alerted property managers to the fraud included proof of employment, 36%; verification of proof of income, 35%; and fake paychecks being submitted by applicants, 30%.

The respondents also were split with their approaches to mitigating fraud risk: 25% used in-house employees to conduct manual screening, 34% outsourced services and technologies, and 33% didn’t use any formal tools and relied on manual resident screening processes.

“Those who rely on their instinct, rather than a formal methodology, may put themselves at risk,” said Johnson. “Not only is that not effective for detecting potential fraud—especially as fraudsters become increasingly sophisticated—it also risks denying housing based on the property manager’s biases.”

Johnson added that there is no one-size-fits all approach for fraud. However, identity-based technology solutions built specifically for multifamily can help companies detect red flags and also help streamline the application process.

What not to do? According to TransUnion’s report, it urges property managers to not rely solely on credit scores to predict the risk of fraud, to not use antiquated systems, and to not operate in reactive mode.

Source: Multifamily Executive