Fraudulent applications have always been a concern for property owners and managers. Fraud is taxing for properties to resolve and can directly impact their bottom line. The COVID-19 pandemic has all but compounded the risk for owners to now include fraudulent payments from current residents.
Last year, a Forrester study revealed that 95 percent of property managers have experienced fraud in the past two years, and 80 percent have experienced it more than 20 times. The COVID-19 pandemic adds another layer of concern given the ways property managers are relaxing payment requirements to allow residents to make rent and mitigate lost rental income.
Pandemic-related unemployment continues to rise, foreshadowing an impending recession. Currently 14.7 percent of the U.S. labor force is out of work, totaling over 20 million people. Government eviction moratoriums and stimulus payments are a boon to residents who would otherwise be facing homelessness. While rent is still being collected, residents are increasingly turning to credit cards, taking advantage of the overwhelming majority of property managers offering to absorb fees in order to allow residents to make on-time payments. Domuso’s April 2020 Rent Trends infographic showed a 60 percent rise in credit card use by residents, which read another way, adds a 60 percent increased risk of exposure to credit card chargebacks. While tracking May rents trends, we anticipate that number will remain high.
Pandemic-related Fraud a Growing Concern
As Multifamily Executive recently reported, pre-pandemic fraud prevention techniques included in-person screenings and work reference validation. Both are extremely difficult to perform with more front office staff working remotely, limiting the opportunity to interact with applicants in-person. And with more companies enforcing a work-from-home policy, a traditional “office line” is no longer available to call for reference checks. Now, factor in the predominant issue of cost-burdened renters trying to stay in their homes.
Fraudulent payment activity, including writing bad checks and money order scams should be of immediate concern for property operators. Because of the wide-spread risk, property management companies often require cash equivalent payments such as money orders or cashier’s checks. But these forms of payment are prone to being tampered with or stolen.
As the requirement for contactless payments increases, Domuso provides risk mitigation tools to protect properties from fraudulent payments. Domuso’s proprietary Online Certified - or digital certified funds - securely verify a resident’s bank balance before transferring a payment directly to the property, creating the digital equivalent of a cashier’s check or money order. Domuso takes it one step further to certify the payment even if it is returned, ensuring the property is always paid in full. Not only can paper money orders and cashier’s checks be stolen and tampered with they also require a manual deposit, which creates a potential security risk. Online Certified ensures the funds supplied are authenticated and applied directly to the property’s accounting system.
For those who need to pay by cash, Domuso is integrated directly with MoneyGram, enabling residents to deposit funds at any MoneyGram location and have the digital certified payment transferred immediately into the appropriate account.
Additionally, as credit card use continues to rise, properties should be prepared for an increase in chargebacks. One study found that in 2019, 81 percent of individuals admitted to filing a chargeback out of convenience, and a considerable percentage of the cases disputed by property managers were lost. Domuso offers properties zero risk chargeback protection to keep their ledgers in the black while payments are being disputed.
Millions of dollars of lost rental income are at stake for property management as a result of fraudulent activity. Talk to us about how to protect your bottom line, reduce risk exposure, and create greater operational efficiency.