New tenant screening solutions are stopping fraudsters before they apply, with tamper-proof income and employment data that comes straight from the system of record.
Property managers and the tenant screening services that support them are facing a growing threat that’s becoming increasingly sophisticated: online rental fraud. As more and more rental applications go digital, many fraudsters are following suit—and the financial consequences are proving to be significant.
While advanced technology has made the rental application process faster and more convenient, it has also exposed new vulnerabilities and opened new opportunities for fraudsters, and traditional tenant screening methods are struggling to keep up.
Below, we explore the current outlook on rental fraud, why traditional income and employment verification methods are missing the mark, and how direct-source data can provide a much-needed alternative.
The alarming state of rental fraud
Recent data paints a worrying picture of just how widespread online rental fraud has become—and how damaging it has been for the rental property industry. According to TransUnion’s 2023 year-end survey:
- 60% of property managers have fallen victim to online fraud in the past two years
- 84% report that forged or altered documents have emerged as their primary challenge
- 38% faced increased eviction rates due to fraud
- 27% incurred bad debt and other financial losses
- 43% now spend more of their time checking applications for inconsistencies
Most concerning is that, despite these challenges, 33% of property managers still rely solely on manual screening methods when processing rental applications.
This creates a wildly uneven playing field in an environment where fraudsters have powerful technologies at their disposal—like generative AI models that can convincingly mimic official documents. In case after case, traditional tenant screening processes are showing they’re no match for these impressive new tools.
Where legacy verifications fall short
Traditional verification methods that rely on uploaded documents and manual checks have a few fundamental flaws in today’s predominantly digital landscape:
- Manipulating documents is easier than ever.
As noted, AI-powered editing tools are now widely available and relatively simple to use. This makes it easy for anyone to quickly alter a paystub, bank statement, or employment verification letter to misrepresent a prospective tenant’s income and employment status. - Manual verifications are increasingly tedious and time-consuming.
When property managers and screening services are forced to call or email employers, authenticate bank statements, and cross-check income documentation, it drains their time, energy, and resources—not to mention introduces countless openings for human error. And the smarter online fraud tools become, the more of this verification work is required. - Verification delays increase vacancy risk.
As verifications drag on and become more complex, the longer rental properties stay empty—and the more likely good applicants will find housing elsewhere. This drives up costs while derailing property managers’ main source of revenue. - Standard credit checks don’t detect fraud.
A traditional credit report may speak to a potential tenant’s historical propensity to settle their debts, but it can’t speak to their current financial situation or their ability to afford monthly rent payments—let alone whether you can trust what’s on their application. For that, you need access to income and employment data and documents that are verifiably accurate.
The benefits of direct-source data
This is where consumer-permissioned, direct-source verification solutions like Argyle have a leg up on the fraudsters.
Instead of relying on second-hand documents that applicants can easily manipulate, Argyle pulls income and employment data and documentation straight from the system of record. That means:
Untouchable data integrity
With direct-source verifications, applicants connect tenant screeners and property managers directly to their employer or payroll provider account. That means income and employment data flows straight from their records and cannot be tampered with en route to a screener’s desk.
- Immediate answers
Because direct-source data is a one-to-one, real-time representation of what’s in an applicant’s payroll account, it provides an up-to-the-minute look into their income and employment activity—offering unparalleled visibility and eliminating the threat of outdated or inaccurate information. - Comprehensive coverage
Direct-source income and employment data goes beyond an applicant’s basic employment status and the net amount on their latest paycheck. It can also provide a glimpse into their job tenure, income stability, and earnings trajectory—including gross-pay details like commission structures, bonus patterns, and where else their income is distributed. - Efficient application processes
By taking manual verification tasks out of the equation, tenant screeners and property managers can decrease application processing times, avoid delays, and speed up move-in schedules by days or even weeks, ensuring a steadier stream of revenue.
Payroll connections versus banking data
It’s worth noting that not all direct-source financial data is created equal when it comes to income and employment verifications.
Payroll connections are not the only solution on the market, and tenant screeners may turn to other automated data sources as they strive toward operational efficiency. This includes open banking platforms, which allow them to connect to and pull data directly from a prospective tenant’s bank account.
While banking data offers a real-time view of an applicant’s cash flow and spending habits, it also carries some significant disadvantages when compared to payroll connections, including:
- Limited visibility into employment: Banking data can reveal past income that has already been deposited, but it can’t verify whether an applicant is employed and earning income on an ongoing basis—which is critical when evaluating a prospective tenant’s ability to pay their monthly rent.
- Incomplete picture of income: Bank statements and transaction feeds fail to record any income that is routed to other accounts and alternative payment channels. This is a particular problem in the gig economy, where many workers split their deposits between multiple accounts and have some or all of their income paid out directly to cards.
- No access to documents: Open banking doesn’t provide access to proof-of-income documents like paystubs and W-2s, meaning tenant screeners must still collect these forms directly from applicants—reintroducing the same inefficiencies and risks that direct-source verifications aim to eliminate.
- Flawed rent-to-income ratios: Banking data only captures net deposits, with zero visibility into gross-income details like deductions and income distributions. This means an applicant’s actual earnings may be underrepresented in the rent-to-income calculations tenant screeners rely on.
In contrast, direct payroll connections are able to verify an applicant’s ongoing employment, present a detailed view of their net and gross pay, and instantly provide access to proof-of-income documents—in short, equipping tenant screeners with the insights that truly matter when making rental decisions.
The new screening playbook
When combined with other essential steps—like checks designed to confirm an applicant’s identity, criminal background, and rental history—direct-source income and employment verifications help build a much more robust tenant screening process.
They do this by delivering real-time, accurate data that unlocks:
- Greater confidence in tenant approval decisions
- Minimized fraud, reducing eviction rates and financial losses
- Simpler compliance programs with records free of human error
- Enhanced operational efficiency for tenant screening teams
- Faster application processing, eliminating manual tasks and delays
- Better tenant quality with lower turnover and higher application competition rates
Better still, providers like Argyle make direct-source verification tools easy to implement and use, with turnkey solutions that can be up and running in a matter of days. It takes just two quick steps for applicants to connect their payroll accounts via Argyle’s automated workflow, granting tenant screeners instant and ongoing access to their data.
Making the switch to direct-source verifications
For any tenant screeners or property managers still relying on traditional, manual verification methods, now is the time to move to a direct-source solution. Direct-source technology like Argyle’s has matured to offer seamless integration with existing property management systems, while also providing superior protection against the growing threat of online fraud.
By pulling verified income and employment data straight from the source—rather than relying on easily alterable documents—tenant screeners can significantly reduce their risk.
In a rental landscape where a majority of property managers have already fallen victim to deception, direct-source verifications aren’t just a nice-to-have for operational efficiency—they’re an essential safeguard if you want to protect your properties, your reputation, and your bottom line.
Ready to fight the rising tide of online rental fraud with better data?
Get in touch with Argyle’s expert team for a personalized product demo—and discover how direct-source verifications can reduce your risk and take your screening process to the next level.
