Rental housing companies share thoughts on combating lease fraud

In double-checking the veracity of recent prospective resident applications, Stephanie Jackson, Senior Area Vice President of Atlanta-based RAM Partners LLC, looked at the pay stubs attached to one of them and did a double-take. 

“You’ve got to be kidding me,” she said to herself. “There were grammatical errors. I Googled the LLC, and there was [one with] a very, very similar name, but in a different area of town. It was a little weird. I thought, ‘This can’t be that one because the names are different, but it is weird that it is so similar.’ I Googled the address and found that it was residential, in a neighborhood.” 

Experiences like these have become all too common for those vetting lease applications for rental housing communities. Jackson, who spoke about combating fraud at last year’s Apartmentalize conference and will do so again this year in Philadelphia, says she sees red flags most often around attempts to falsely inflate income through fake pay stubs or checks and the like, and phony credit protection numbers (CPNs) to obscure bad credit. 

“It’s almost this extra industry that has been created for falsified pay stubs and CPNs,” she says. In addition to breadcrumbs like oddly similar “employer” names and unusual addresses—which also have included other retail company store locations—Jackson notices fonts on the pay stub that don’t match, or pay periods that don’t align correctly, or a “year-to-date” payment amount that’s exactly the same on two or more different pay stubs. 

“I’ll go back through and verify the math. If you get paid biweekly but ‘year-to-date’ never changes, it’s a pretty good indicator that somebody is in there messing with the PDF, and they don’t have the aptitude to understand that the year-to-date should change,” she says. “Sometimes with the font, especially ADP, they have specific fonts they use. If you go back into that document and try to change it, you can’t match that font. If the name is in a different font, that’s a good indicator that somebody has been messing with that PDF.” 

While CPNs are usually a legitimate tool obtained through the IRS to protect Social Security numbers, applicants are required to say they’re using one, which those using a phony CPN—usually so they can hide bad credit—don’t tend to do, Jackson says. “You’re not getting much credit history,” she says. “There’s very little I can capture about that applicant.” 

When the CPN has been falsely generated for that purpose, “I can tell pretty quickly because it will flag in our credit screening that it’s new,” she adds. “I can look at this person’s date of birth and say, ‘Is it feasible that this 50-year-old has never had a hit on their credit, ever? They came to the office in a brand-new car.’” 

Companies selling the false CPNs have become a bit more sophisticated of late, though, typically pulling two inquiries,

Jackson says. That skirts around being flagged as “new” perse, ,se, but when there are only two inquiries, both within the previous 60 days and close in time, that’s still suspicious, she notes. 

Alyx Hill, Regional Director of Operations for Washington, D.C.-based Borger Management, says the industry’s switch-over to paperless operations has “made fraud much more rampant because people are behind their computer screens.” They put forth fake IDs, Social Security cards, income statements, pay stubs and other documentation during the application process. 

“At least once a month, somebody’s pushing something [suspicious] through for me to take a look at. It’s rampant. It’s a definite problem, unfortunately,” she says. “The application is the main [issue]. Typically, once someone is in an apartment, there’s not a ton of fraud.... Once in a while, somebody tries to use a credit card for a payment that is suspicious.” 

Borger sees the same types of red flags when it comes to falsified pay stubs and other documents, such as words capitalized that shouldn’t be, or the line for state taxes without the state actually filled in, Hill says. 

“People have gotten very, very good,” she says. But “they will leave it saying, ‘State,’ instead of putting in the actual state. That’s a big one they miss that highlights it for us.” Other indicators: “Mixing up O’s and zeroes, looking blurry like they copied and pasted, font types changing or uneven alignment. Little things that, on professional pay stubs or a tax return, are going to be consistent.” 

Memphis, Tenn.-based Fogelman Properties has seen increases in fraud to varying degrees throughout its portfolio, especially in Atlanta, Texas and certain submarkets in Florida, says Debi Wherry, Senior Vice President of Operations. “We see a lot of altered pay stubs and inflated salaries from applicants, which is often obvious and easy to catch,” she says. “However, our leasing agents have also experienced more legitimate-looking fake IDs, pay stubs and letters from employers. We believe there are online companies that are now selling these materials to rental applicants.” 

Combating Fraud, Before and After the Fact 

To ensure leasing offices are doing everything in their power to combat fraud before the fact, Jackson recommends starting with training and awareness. “You have to teach everybody on your team, most importantly your leasing teams, that this is out there, and what to look for,” she says. “If you’re saying it doesn’t happen at your properties, it’s because you haven’t caught it yet. It’s happening at every property to some extent.” 

Then, find a product to help catch fraud by scanning PDFs and looking for the sorts of irregularities that Jackson has uncovered over the years. “They’re a dime a dozen,” she says. “They can scan original PDFs to see if things have been modified; if the documents they’re showing as original are truly original.” And finally, after going through the routine verification and credit-screening process, ask somebody at a higher level to do the kinds of double-checking Jackson does to ensure legitimacy. 

At Borger, Hill does trainings on how to look closely at income statements and pay stubs to catch fraudulent attempts. “That’s where we try to be the most proactive. We have to stop it at that point,” she says. “We have our best practices, which starts during the tour. If a prospect is coming to the property, verifying their ID to make sure it’s them. During the application process, it can be as simple as, does the name on the application match the ID? I see discrepancies that way. That’s a clue they’re doing something fraudulent. Depending on the screening alerts, we might be requesting to look at their Social Security card.” 

Fogelman’s first line of defense is to use checkpoint verification, which helps the company spot fake Social Security numbers, Wherry says. “If our sites receive notification of possible fraud activity, we cannot move forward with the lease until further screening is completed,” she says. “As a secondary verification, our leasing team calls an applicant’s employer to verify that they are a current employee, and that their rate of pay matches what’s listed on their application. We are also in the process of adding third-party help, which will verify Social Security numbers, employment and even bank statements.” 

Fogelman attempts to discourage such activity by communicating to all applicants, whether online or in person, that certain forms of information must be verified for them to qualify for a lease, Wherry says. “Our policy is to cancel applications if the applicant cannot provide us with the requested information within 72 hours,” she says. “We believe communicating these policies early may prevent applicants from wasting their time and money if they knowingly have forged documents.” 

When an applicant has been accepted and a lease is signed, fraud becomes more challenging to combat, Wherry says. “Our only recourse is to file eviction quickly if we find out fraud has taken place after the fact, or if their rent has not been paid,” she says. 

Once a fraudulent applicant gets a key to a unit, “if they get that far, we never receive a payment, and it’s going through the court system,” Hill says. “Especially in the DMV [D.C.-Maryland-Virginia] area, that can take quite a bit of time.” But the company has no hesitancy to immediately file a breach-of-lease suit since its application and lease explicitly state that information provided must be accurate. “We can move forward since they falsified information,” she says. 

Combating fraud after the fact typically requires legal action, Jackson agrees, filing an eviction based on false claims. “You gave me an application, and you stated that everything you gave me was true, and it’s not,” she says. “Most of the time, you can file an eviction, especially if the person is not who they say they are—if you have an identity issue, where maybe they have given you the wrong ID… Take them to court. They’re going to have to bring their ID with them. Present the information you have, the judge is going to ask them, under oath, certain information, and ask them for verification they can’t provide. And you’ve got what you need.” 

Other Scenarios 

Most fraud does not involve identity manipulation, Jackson says. In the majority of cases, “I might be who I say I am, but all the information I’m giving you is not me,” she says. “I’m trying to rep for myself, except I have really bad credit or I don’t have enough income, and I’m trying to find a way to meet your standards. That’s where you’re finding packages you can buy on Facebook. The actual person is trying to move into that unit.” 

In other cases, the applicant is bringing a roommate with them who’s someone other than the person presented, Jackson says. “I’m leasing, and I’m saying this person is moving in with me, but they’re actually not—it’s somebody else,” she says. “But more of the time, it’s, ‘I just can’t qualify any other way but to provide fraudulent documents.’” 

Hill notes that rental housing companies face the same types of phishing attacks as any other industry, ranging from emails with links that spread viruses, to texts purporting to be from the company President telling someone to buy gift cards and then give them the numbers off the back of the card—which the scammer then uses to make purchases of their own. “We have a good IT team, but they still get through,” she says. 

To combat those types of fraud, the IT department at Borger has implemented software to kick emails out of inboxes or restrict them from coming through in the first place; and they also send warning notifications to the entire staff, especially when there’s a particular scam that’s rampant that month, Hill says. That includes alerting people to gift card scams. “It’s wild what people do,” she says. “Every once in a while, [scammers] get that one person who will follow through.” 

Ed Finkel is a frequent contributor to units.