By implementing a few practices in your tenant screening process you can help reduce your exposure to fraudulent applicants.
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Resources Mentioned in this Episode
https://www.texasrealestate.com/members/posts/landlords-beware-of-these-identity-fraud-scams/
https://themortgagereports.com/34411/tips-for-landlords-beware-of-tenants-who-are-identity-thieves
Show Transcription:
Eric Worral: (00:00)
Hey everybody, welcome back to another episode of RentPrep for Landlords. This is episode number 281. I’m your host Eric Worral. And yes, this is my real voice. I’ve got a little bit of congestion going on. So I apologize in advance for the way that I sound. This is not a filter but what we’re gonna be talking about today is maybe appropriate for my voice cause we’re gonna be talking about identifying identity theft intended applicants. No, I’m saying it’s appropriate cause sometimes when they show those people on a, you know, like a day line or something and they have them all blacked out like there a shadow. This is, I feel like this is how their voice usually sounds, where they’re trying to hide their identity. You all was a screwing Toto and do a blah, blah blah. Yeah, you get the idea.
Eric Worral: (00:47)
But we’ve got an interesting article today that we’re going to be focusing on and how there is an uptick in identity theft happening for landlords and property managers. And we’re going to be getting to that and really diving deep into this subject matter right after this.
Voice Over: (01:04)
Welcome to the RentPrep for Landlords podcast and now your host, Steven White, and Eric Worral.
Eric Worral: (01:10)
So I was on the world wide web, also known as the www and I came across this article from texasrealestate.com. That’s it. It had the title landlords be aware of these identity fraud scams and it was saying that property managers and landlords should be on the lookout for these four types of fraud, synthetic identity fraud, first-person fraud, third party fraud, and identity manipulation fraud. It’s a pretty short article that I posted on October 8th. But it did link to a report from the real estate data from CoreLogic, which kind of goes into more detail. And what I’m going to do is I’m going to break down these four different types of fraud and how they apply for landlords and property managers, what to look out for, what you can do. And also just having a better understanding of this. So if you know what’s going on out there, you know what to avoid.
Eric Worral: (02:03)
So looking at the article from core logic a, which I will link to this in the show notes of today’s episode on our website, you can always go to rent-prep underneath resources you’ll find our podcasts. That’s all I laid out in chronological order for you. It explains the four types of identity fraud. And what I’m going to do is give you kind of a frame of reference or at least an example that we all know. Hopefully, you’ve seen the show the office and you know the characters, right? There’s Jim helper who’s the main character, Jim, very likable chap. And then there is Michael Scott, his boss who a different character Michael always trying to appease, you know everybody around him. He wants everybody to like him. So first-person fraud or mulling, this is a type of fraud where the applicant is acting for another when renting the apartment, the applicant or sometimes call the mule, uses his or her real identity information on the application.
Eric Worral: (02:55)
But the applicant is not the person who moves into the apartment. So in this particular case, let’s say that Jim Halpert is applying to, he wants to apply to your rental, but he knows that he has either maybe a credit score issue, a criminal history, eviction history, something that is not going to allow him to pass a background check or get past your initial screening. So he’s going to go to Michael in the office and he’s gonna say, Hey Mike, and you know, I know you could really do me a big favor. If you could help me out with this one little thing, I’d Oh your forever. And you know that goofy looked at Michael Scott’s going to get, he’s going to say, yeah, what is it? So he’s going to have Michael actually go and apply for the rental uses, own information, everything. And this is known as a first-person fraud.
Eric Worral: (03:38)
So Michael is going and using all of his information, but really when it comes to the move-in date, Jim moves into the rental, not Michael. And Jim has maybe some curious things on his background report that were never uncovered because Michael was mulling or was the mule in the first person fraud. So it says that in some cases the applicant is a family member or a friend or the intended tenant. In other cases, an applicant who is desperate for money is paid a fee in exchange for renting a place for another person or group. The next identity fraud that we want to talk about is third party fraud identity theft or a true name fraud. The proliferation of data breaches, mail theft and burglaries has led to a dramatic increase in identity theft fraud across all sectors of the economy and basic third party fraud.
Eric Worral: (04:27)
The applicant assumes the identity stolen and uses the victims personally identifiable information known as PII, including name, social security number, and date of birth. Portions of the stolen PII can also show up in the identity manipulation or synthetic identity fraud scheme just described. Next. So in this particular case, Jim maybe goes through Michael Scott’s email and his mail on his desk and figures out his information, his social security number here. Maybe he gets a pay stub or finds hacks and HR gets all of Michael’s information to realize that he is a bad tenant. He has a, you know, all these evictions and all this bad information on his a credit file. So what Jim does is he goes and he applies, and this is actually a worst-case scenarios where you see this a lot is with digital rental applications where you’re not even meeting these people.
Eric Worral: (05:18)
Sometimes maybe you’re just having a phone call conversation because you’re kind of rushing through the tenant screening process. And then he uses Michael’s information. So that’s third party fraud. You’re stealing somebody else’s information and you’re acting as them. So the next kind of fraud that we’re going to talk about is identity manipulation fraud. The fraudster slightly alters some of his or her information in a way that looks as if it could be a typo or spelling error. Common examples include a social security number that’s off by one digit or includes transpose numbers, a slightly different name or an altered birthdate. So maybe this particular case, Jim applies for a rental, but instead of going by Jim or James Halpert he goes by John helper or you know, maybe something completely different Sam Halpert or something like that. But most of the time it’ll be just off by a little bit and maybe he puts that a social security number off by a little bit.
Eric Worral: (06:11)
And the reason they do this is one of two things. They may run into a landlord who says, we’re going to run a background check and the landlord just doesn’t do it. And it’s kind of one of those things where the landlord, you know, says what they’re gonna do just to kind of scare off some people, but it doesn’t scare off everybody, in this case, the identity of manipulation fraud, where they’re just going to manipulate their own identity a little bit. But then what it does is if they do run the background check that the landlord might not get any news back on it and they consider it better than, you know, bad news. The goal of the identity of manipulation is to confuse the system so the application doesn’t connect to the fraudster’s true identity. So maybe they just get back something that says we weren’t able to find any information on this person, no records found, whatever.
Eric Worral: (06:55)
And it just kind of confuses the system. And these, this applicant in this case GM, and it’s weird to think of Jim as a bad renter cause I’m sure he would be a great renter gets through just by manipulating his own information just slightly. And the landlord many times either doesn’t do their due diligence or they use the service that’s automated and it just says no records found and they just take that as a good thing rather than, Hey, this isn’t even like the proper information. All right, so now the fourth and final one, which is actually the most important one because it’s the most prevalent is synthetic identity fraud. Also known as fictitious identity. In this scheme, the fraudster creates a fake identity either by fabricating all identifying information that’s true social name, date of birth, cobbling together and identity from multiple stolen sources or a mix of both real social security numbers are used typically from children, elderly or deceased people and are used in combination with made-up names and birth dates.
Eric Worral: (07:53)
But even the social security number can be fabricated. So there are firms that solve these fabricated social security numbers, his credit profiles or CPS, excuse me, credit profile numbers, which people combined using an application sometimes without realizing they’re even committing fraud. So in this case, w I did a little research on these and it’s saying that this is the fastest-growing type of identity-related fraud accounting for an estimated 85% of all identity fraud. And the interesting thing is that and I got this from a different article, I’ll DM mortgage reports.com is that the way that this works is somebody may get a credit of fake identity, right? And it has no credit on file, no history of any inquiries or anything. What they’ll do is they’ll make an inquiry. And then when that happens with the credit bureaus, they now see that an inquiry has been created and it actually opens up a credit file on that fake identity.
Eric Worral: (08:48)
So once that happens, a lot of times what people will do is they will reach out to somebody with good credit, maybe them a fee to be added on as a co-manager on, or an authorized user on their credit profile, on a credit card, whatever it may be. And then they will be taken off a year later. But all of that credit kind of gets transferred to them by being an authorized user one of their credit cards. So that’s one of the ways that they’ll build up a credit profile off of what could be a deceased person’s credit profile. You know, they stole their social security number and then used a fake fictitious name that they added to it, which is just kinda crazy that this can all be done in my opinion. But that’s how they do that and they essentially nurture this fake identity over time.
Eric Worral: (09:34)
And then these curated identities are developed so that their credit limits increase. Giving the thieves access to higher-value crimes before they cash out and abandoned the identity. A final thing that they do, which I just described as piggybacking fraud, is a form of synthetic fraud perpetrated. When someone with good credit as an authorized, you do identity to his or her credit card account for a short time. So pretty crazy stuff. But the synthetic identity fraud is really the one that’s growing the fastest. They call it the dark web, right? You get all these people that are stealing all sorts of information. A, again, a good idea if you can freeze your kids’ credit, if there are, you know, you have a young kid, they’re not going to need their credit for any reason, breeze it so that somebody can’t access it easily.
Eric Worral: (10:16)
A, it’s always a good reminder to do that. But this synthetic identity fraud, like how are you going to prevent that as a landlord or property manager? Well, there are a few things you can do. You can call their their personal references that they provide. One of the articles I was reading said to even take a picture of their ID, so if they give you your license to snap a picture of it and then text that to the person as well, just to say, Hey, can you confirm visually that this is the person that was your tenant or former employee? Because if it’s a case where it’s you know, first-person fraud where maybe Michael Scott is pretending to be James Halpert, they can say, no, that’s not James. That’s not Jim from the office. That’s his boss, Michael.
Eric Worral: (10:58)
You know, there’s ways you can do that as well. And few articles that I read mentioned getting their license, it’s a lot better to get their license in person and be able to take a look at them rather than get their license via, you know, a photocopy, they can be easily manipulated where the address is, the pitcher, the name, everything could be manipulated on it. So if you can see their license in person and make that part of your screening funnel process that is going to help you out by avoiding some of this fraud. Cause if you think about it at that point, for somebody to commit the fraud, they would have to actually have created a fake a license, whatever is in their state. And when we get into that level of fraud this person’s really selling out to try and get that rental property where most likely anybody kind of committing this type of fraud is going to stick with the easy to do kind of fraud where you know, they found some situation where it’s a landlord who doesn’t run background checks and just do maybe an online rental application.
Eric Worral: (11:55)
And they were cool with just a phone call conversation and then they said, yeah, go ahead and take the property just by asking for their license. Maybe taken a picture of it for your files in person. I think you’re going to deter a lot of these fraudsters. The thing about these fraudsters is that they are creatures of habit. They are pattern recognition specialists, right? They know, they know when they look, even at your rental listings, you go, you know what, that’s a Mark. That’s somebody that’s a landlord that I think that I could get in with a fake identity. I can leave them high and dry. The CoreLogic article says that these types of identity fraud evictions cost between five to $10,000 on average and you’re not going to get that rent that was due and then they were late or whatever. And United would be able to find them, cause that’s not even the person you were dealing with all along.
Eric Worral: (12:44)
They know what to look for. So you can let them know in your rental listings that you run a background check that’s gonna deter some people. Then when you talk to them and you’re prescreening steps, you let them know, Hey you know, you can come and check out the rental property. I do accept rental applications. Please bring on two valid forms of ID so that we can verify you are who you are. And then, you know, just something like that. And then they no show. Well great for you. They know showed that that’s good. You know you want to put those little hurdles sometimes in your screening process that’s going to deter a fraudster from even trying to apply to your Reynolds. And like, you know, I mean everybody knows somebody who has been the victim of identity theft. It’s only gonna become more prevalent.
Eric Worral: (13:26)
So keep an eye out, keep an ear out for it. And I just make sure that you’re protecting yourself and just know that if it does happen to you, sometimes it’s unavoidable. You get somebody who is so committed to a life of crime, it’s going to happen. It’s a numbers game but just do the best you can to try to avoid these kinds of issues. And if you use a service like RentPrep, we do a social security search. We will look up the number, we’ll make sure it confirms with the date of birth that they have all the information that we have. Where a service like ours falls short is a situation. Kind of like when we talked about the first person fraud, where Michael actually goes for Jim in his place, and we’re looking up all of Michael’s information. We have Michael social, his date of birth, everything matches up.
Eric Worral: (14:08)
We’re giving you really good information, but then Jim is in your rental. In those situations, we can help out with that. You know, we can only give you the information on the applicant’s information we get. So that’s where it’s on you to make sure you get the right person and you’re vetting people the best you can. So it is a team approach when it comes to getting great tenants for your properties. All right guys, again, sorry for the voice. Sorry. I’ll try and clean it up by next week. Hopefully, you know, feeling better. But I’m going to link to all these resources for you. I’m sure you’ll find them interesting. I certainly did. And yeah, until next week guys, have a great week and take care.