Fraud is becoming a real watchword in lettings – and it’s a criminal act that’s becoming harder to spot. Observations reveal that tenant fraud is mainly confined to the documents renters are asked to supply. It can take one of two guises: look-a-like documents that are created from scratch, using data and figures that are to the advantage of the tenant, or genuine documents that have been tampered with to make them more favourable. Amending personal details and figures is typical, while fake ID documents are sometimes used by a prospective tenant to substantiate who they say they are.
“Over the last two years, we have seen fraudulent applications increase by over a third, from 110 applications a day in 2021 to 150 a day in 2022,” says CEO of HomeLet, Let Alliance and Rent4Sure, Andy Halstead. “Worryingly, this is continuing into 2023,” and there is a very particular referencing trend emerging.
Over the last two years, we have seen fraudulent applications increase by over a third, from 110 applications a day in 2021 to 150 a day in 2022. Andy Halstead CEO, HomeLet, Let Alliance & Rent4Sure.
It pays to tamper
Wouldn’t we all like to add an extra nought onto the amount we earn? The majority of us, however, are resigned to how much we receive in wages and what that affords us in life. Sadly the cost-of-living crisis – an economic situation that’s biting hard on the heels of Covid – is forcing some tenants to take radical action.
Although recent research by Goodlord found that only 1 in 1,000 of its tenancy applications contained a fraudulent element, it was a counterfeit payslip that was involved in 54% of those isolated cases. Payslips can be crudely forged to show a greater income than actually exists but there is also evidence of confusing or missing off gross/net pay and fudging tax codes.
Amending personal details and figures is typical, while fake ID documents are used by a prospective tenant to substantiate who they say they are…
It makes sense that tenants are tempted to falsify their earnings in harsh fiscal times, especially as referencing becomes more stringent and the cost of renting keeps rising. In fact, the latest HomeLet Rental Index – reflecting activity in February 2023 – positioned the average UK rent at £1,175 per month. That’s a rise of +0.3% on rent levels seen in January and a figure that takes year-on-year rent rises to +10.2%.
Spotting fakes, whether that’s wage slips, passports or employer reference letters, isn’t as simple as holding the document up to the light (a test for those old enough to remember a banknote’s silver line and Queen’s head watermark).
Authenticity and origin is paramount but human error in a branch setting sometimes leads to mistakes and fraudulent documents can – and do – slip through the net. Often it isn’t a clever counterfeit that catches agents out. It can be a lack of time – time to run a Companies House check on an employer or a deep dive into the legitimacy of a company’s domain name.
Speed versus due diligence
On the point about time, perhaps it’s the speed at which the lettings market has been moving that leads to a little hastiness. No agent, however, should compromise the legality and compliant nature of its business due to cut corners. Someone who understands the need for speed – especially when a landlord wants to minimise voids or when there are multiple tenant applications – is Stuart Horsfall from Proceda Landlords UK. “We offer two, fully inclusive credit referencing packages for busy letting agents,” says Stuart. “Both packages can be accessed immediately; there is no lost time waiting for a reference to be returned as the references can be carried out within minutes on the Proceda website.”
We offer two, fully inclusive credit referencing packages for busy letting agents; both packages can be accessed immediately – there is no lost time. Stuart Horsfall MD, Proceda Landlords UK.
Agents can choose an ‘in-depth’ credit referencing pack in collaboration with Equifax, which allows agents to carry out all the due diligence required to reference new tenants. It also includes ten referencing checks that yield Right to Rent data, ID verification, Know your Customer and Risk Navigator. A step up is Proceda’s package that works in tandem with Open Banking, for additional real-time risk assessment of affordability and income.
Mentioned by Stuart is one of tenant referencing’s two new kids on the block – Open Banking. The other is artificial intelligence (AI) and Tom Goodman from Vouch is a huge advocate of both. “New technology, such as Open Banking, machine learning enquiries and AI-based ID tools, means fraud can be picked up with a much higher degree of accuracy than ever before,” comments Tom.
New technology, such as Open Banking, machine-learning enquiries and AI-based ID tools, means fraud can be picked up with a much higher degree of accuracy . Tom Goodman Managing Director, Vouch.
“Open Banking and AI is no longer the preserve of big agencies with deep pockets and teams of IT specialists. It can be easily and cost-effectively integrated into any letting agents’ operations. For instance, Vouch can deliver an advanced and secure service from only £6 per full tenant reference. Technology is already transforming how referencing is handled at Vouch for the better, and we predict that this year will see its presence become firmly cemented across the whole market,” adds Tom.
While Tom says the vast majority of tenants don’t lie about their income or falsify documents for the referencing process, the small minority who engage with fraudulent activity are getting more creative in how they cheat the system. Thankfully, the tools companies now use to spot fakes are becoming increasingly more sophisticated – an aspect that Tom says, “helps safeguard agents against nefarious applications, as well as contributing to increased rates of detection.”
As well as Open Banking, which provides a real-time overview of incomings and outcomings (including wages), tech-driven referencing from a supplier such as Vouch can spot other fraudulent inconsistencies that are often overlooked in branch. This touches again on the lack of desk time needed to manually investigate the details supplied but also highlights the in-branch absence of hypersensitive technology designed to spot even the most subtle of flaws.
Nailing the small nuances of fraud
“Vouch uses identity verification software, which matches real-time photos with passports, ensuring the person is who they say they are and that they have a right to live in the UK. In addition, we use email recognition software to ascertain whether an email is real and we see how long it’s been in use for. This can help us pick up on cases where someone might be sending a reference from a fake employer, for example.”
It’s at this point that Tom mentions guarantors – a tool that gives tenants another option other than artificially inflating their income – and rent protection insurance for a thorough ‘belt and braces approach.
Andy is another fan of AI capabilities and feels new technology can work in tandem with established cross-referencing data points and also the human touch. “HomeLet, Let Alliance and Rent4Sure continue to evolve their tenant referencing: integrating technology, data and AI with our team of referencing experts, our CIFAS cross-checks and our own unique default database.”
The AI science aspect is mind-blowing and illustrates how a machine can rival the sharpest of minds and eyes. “The AI system integrated into the HomeLet, Let Alliance and Rent4Sure processes adds an extra layer of protection against tenancy fraud. The system checks every document we receive, whether a PDF, image or scanned copy, and continues to get smarter as it learns from every document processed,” says Andy. “The multi-layered document analysis technology inspects the metadata and structure of files to highlight uncommon changes and identify tampering of pixilation to detect forged images.”
Planning for the unexpected
Despite Open Banking and AI joining the existing referencing framework, tenants can change just as much as the proptech. “Tenancies can go wrong, despite every care with the selection and the management of the rental property,” comments Graham Sandley from Diligent Services. “The unexpected can happen and tenants may be unable to pay the rent due to redundancy, accident, sickness, separation or divorce.”
The advantage of rent and legal protection is that experts can be brought in at the onset of a problem. This means matters can be resolved quickly and the property swiftly re-let. Graham Sandley MD, Diligent Services.
He agrees with Tom on the point that rent and legal protection should be offered by agents to landlords in today’s climate. This ensures the client is covered should a falsified wage eventually catch a tenant out and they fall into arrears “The advantage of rent and legal protection is that experts can be brought in at the onset of a problem. This means matters can be resolved quickly and, if necessary, the property can be swiftly relet,” adds Graham. “In the meantime, the landlord will have had the benefit of rental guarantee and cover against the legal expenses incurred in obtaining vacant possession.”
Diligent Services’ rent and legal protection typically offers nil excess, cover for up to 6 or 15 months’ of rental payments should the tenancy fall into arrears – to the value of £3,000 per month – and cover for legal expenses, including eviction court costs.
Fraud and the cost of living
The cost-of-living crisis – and its relationship with fraudulent tenants and affordability – is a topic The Lettings Hub is increasingly talking to its clients about. As well as offering a robust referencing solution through its BOX software and integrated product range (The Lettings Hub can perform all checks for the agent or they can manage the process in-house using the supplier’s software for support), the company’s Heidi Shackell has additional advice.
Tenants can choose to instantly verify their identity, address and credit history, and verify their income from the last 12 months using Open Banking. Heidi Shackell MD, The Lettings Hub.
“With disposable income decreasing for many across the UK, it is sensible for letting agents to review the affordability criteria they apply to their tenants. Good referencing providers will be able to tailor this for each client dependent on their needs. We are also seeing more clients opting to require a guarantor, as standard, as a pre-emptive measure,” says Heidi.
The Lettings Hub is also a big supporter of placing equal emphasis on the tenant when it comes to financial calibre and character. “Agents can allow renters to lead the process via our Property Passport solution,” adds Heidi. “Tenants can choose to instantly verify their identity, address and credit history, and verify their income from the last 12 months using Open Banking.”
There’s also an enhanced Property Passport, that, for a small fee, allows the tenant to add an additional review of their financial data; provide the letting agent with an expert recommendation; pull in a reference from their previous letting agent or landlord to vouch for their suitability, and obtain an overall tenancy score to show how good a tenant they could be – all delivered digitally within 2-3 working days.