Bust Out Fraud - A Fraudster's Long Con
Johnny Bravo??
Helping Landlords Combat Fraud | Exposing Fraudster Tactics | Synthetic Fraud & Identity Theft Detection
Here for the latest trends, insights, and tips to help property managers and rental operators find the best possible residents in a changing landscape.
Believe it or not, fraudsters are not into get-rich-quick schemes.
They aren't trying to make a quick buck.
Instead, they are trying to get as much as they possibly can, and they are willing to wait for it.
They're patient.
So when it comes to a fraudster applying to be one of your residents, they are not simply looking for a rent-free stay.
They have a much more nefarious long-term game plan they are setting into motion.
A "long con" if you would.
And getting into your apartment or home is just one part of it.
"Bust Out" Fraud
According to Transunion:
Bust-out is a type of credit fraud where an individual (or fraudster using a synthetic identity) acquires credit, establishes a normal usage pattern and solid repayment history and then maxes out the account with no intention of repaying.
Career criminals and fraudsters try to use every opportunity, including staying at your property, to legitimize themselves.
Synthetic fraud is especially known for this since they need to build a new credit profile from the ground up.
Using synthetic identities, fraudsters assemble a credit identity from different identifiers--perhaps a Social Security number from a child or deceased grandparent — fused with a name and date of birth from someone within the prison population. The fraudster then adds their own mailing address, phone number, etc., and applies for “under the radar” credit (like a?department store credit card) with a lower bar to entry.
Often, an application for your apartment or home will not be the first attempt they have made to substantiate themselves.
And it won't be the last.
And even if an institution rejects an application, in the process of consideration a new credit profile is now associated with that synthetic identity.
The fraudster will continue to apply to several different institutions until an application is eventually approved.
Slowly and patiently, often up to two years, the fraudster builds credit history, such as additional credit cards, a consumer loan, or even a car loan, making reasonable purchases and paying off the balances, building bigger and bigger credit lines. Until finally, when they’ve developed enough of a credit balance, they “bust-out” and max out the credit line. But because there’s no actual person on the other end of the credit file, there’s no one to go after.
How This Plays Out In the Rental Space
Fraudsters look to get their foot in the door where they will have the highest possibility of success.
Most often they will target landlords that have only the most basic fraud detection systems in place, or none at all.
They know that sometimes smaller property management companies and landlords don't do a full panel of screening. They don't have a dedicated fraud solution in place, and many of their screening reviews are still fully manual.
And in the likely case of a thin file, when the screening comes back with less-than-ideal results, the fraudster is prepared to use any number of tactics to get into the apartment.
领英推荐
In this case, they might charm their way into the lease, offer to pay an additional month's rent deposit, or even provide fake paystubs that show they have the money to make rent.
And once they are in, game over.
They now have an address to continue their nefarious plot.
They can apply for more credit cards, car loans, and personal loans....all using their new address.
Sadly, if/when they are later caught, this may mean that your property's address is now associated with a known fraudster as a previous rental history address.
All around bad stuff for you as the landlord.
And during all this, they very well may pay their rent in full and on time.
My wife used to say that criminals were always some of the best residents until they weren't.
They'd pay rent on time and wouldn't bother their neighbors. They wanted to stay below the radar as their plan played out.
But once they were ready, they'd "bust out".
Your Best Defenses
Synthetic fraud and bust-out fraud are uniquely difficult to catch, but there are some steps you can take to mitigate the risk of this happening at your properties.
A Well-Informed Leasing Staff: Providing proper training, best practices, and incentives to recognize and take appropriate action against fraud is always your first line of defense.
Have A Dedicated Fraud Solution: Your standard screening (credit, criminal, & and eviction) should not be considered your fraud solution. Screening is meant to determine if they will be a good renter, fraud detection is meant to determine if they are who they say they are. These two should be separate and collaborative processes.
Use A Layered Approach to Fraud Detection: The key here is that you are not relying on a single identifier for fraud. An ideal fraud solution will include a mix of identity verification ("Are they who they say they are?"), device verification ("Does the device they are using indicate any suspicious activity?") and identity authentication ("Does this person know things only they should know?").
Use A Screening Provider That Can Cross Industries For Known Fraud: Having a screening provider that can cross reference known fraud and identities between industries will give a helpful boost to identifying fraudsters with the potential for bust-out fraud. Remember that these bad actors are not only applying to your property, they are applying for credit cards, auto-loans, store cards, personal lines of credit, etc.
Johnny, can you help me?
Maybe, let's chat. If you're running into issues where fraud is a problem, or you want to make sure your screening solution is finding you only the best possible residents; reach out or comment below.
Additional References & Resources:
Disclaimer: The opinions and views expressed in this article do not necessarily represent the views of my employer. The information provided is intended for general informational purposes only and may not be suitable for your specific circumstances. The information presented may also be subject to change and may not be up-to-date. Therefore, you should not rely on this information as legal, financial, or professional advice. Please consult with your own legal or financial advisors and abide by all applicable laws, rules, and regulations related to your situation.
Photo by Kool Aid/Facebook
Helping Landlords Combat Fraud | Exposing Fraudster Tactics | Synthetic Fraud & Identity Theft Detection
1 年??"An applicant just came in dressed as the Kool-Aid man, should we be worried about bust-out fraud?" said no one ever. I wish it was that easy.