Merry Fraudmas! ‘Tis the season for short-term rental fraud
The holidays are a time for spending time with the family and for giving and receiving gifts. It is also a time for good food consumed in excessive quantities and, increasingly, it is the time of year people rent a home from a stranger or rent out their homes to strangers. It is also a busy time for short-term rental platforms that facilitate these transactions. In a time when the middle class is increasingly shrinking and the gap between what we can buy and what we would like to have is rapidly growing, it’s understandable that people would look for ways to save, or make, extra cash. Especially around the holidays. As adults, we quickly find out that the gifts and food don’t typically buy themselves after all.
Holidays are the season for short-term rentals… and fraud.
Going home for the holidays is a time-honored tradition but staying with your parents, or your inlaws, over the holidays can drain the cheer out of your holiday celebration and not everyone has the space to welcome their children and their families back into the house to stay over for the holidays. Whatever the reason, many people chose to rent a house or an apartment for the holidays. Usually from one of the house-sharing platforms. Who is renting out all these houses and apartments? Well, if you are leaving your apartment or house to go somewhere else for the holidays renting out your unused property is tempting. Making a few hundred dollars from an asset you are not using at a time when your expenditures increase is generally a good idea. There are also specialized commercial operations that rent out homes for a profit. And, since the holiday spirit is to be inclusive let’s not forget the fraudsters. They also rent out or pretend to rent out properties. Nothing will ruin your holiday cheer faster than falling foul to a fraudster trying to make a quick buck, except perhaps having to deal with a customer on your platform who has just gone through such an experience. Odds are that their encounter with the fraudster on your platform is not even covered under your refund policy.
The most run short-term rental scams
By most accounts, the deposit (or advance-fee) scheme and the bait-and-switch are the most common scams short term rental platforms and their customers have to deal with. Both require the fraudster to present themselves as a real person and therefore both can be reduced, or eliminated, by requiring those renting out apartments to verify their real-world identity. Let’s look at each in turn and then explore the benefits of verified identities in this context.
The Deposit Scam
The deposit (or advance-fee) scheme is a classic take-the-money-and-run type of fraud. It occurs when a fraudster creates a fake vacation rental listing on a short-term rental platform to get money from unaware victims. The fraudster will take photos of the outside of properties found on the Internet and match them with random interior photos from other rental sites or images taken directly from google image search. Together the photos will make the listing feel unique and authentic. It’s real photos after all. The property as listed usually doesn’t exist or if it does exist it does so at a different address than the one provided by the fraudster. With the trap set, the fraudster waits for a victim to inquire about renting the property and once someone does the fraud attempts start. The fraud is pretty basic. The aim is to get the victim to wire funds for a deposit, often the first and last night’s stay. A particularly daring fraudster might even try to get the entire listing price in advance. Once the victim wires the money the fraudster disappears leaving the victim without the wired money and without a place to stay. In some cases, the victims do not realize they have been scammed until they show up at the address and find out the property they rented does not exist. As the wire transfer usually happens outside of the platform this type of fraud is usually not covered by the website’s money-back guarantee.
This scam is only slightly more honest than the deposit scam. In the bait-and-switch the fraudster rents unavailable properties to lure the would-be renter to a less-desirable property. Another version of this scam occurs when the fraudster double-books a location, and then sends whoever arrives last to a backup rental in worse condition than the advertised unit. The result in both cases is the same, the renters get a far worse property that they would never have rented at the price they agreed to pay and the fraudster makes of with all money. There is a variation on the bait-and-switch called “price jacking” where the traveler actually gets the rental they reserved, but once they arrive at the property they have to pay more for it than they originally agreed. At the new “final” price there were probably far better properties available in the area.
The solution for eliminating short-term rental fraud?
The solution for eliminating these types of fraud in short term rentals is actually relatively simple. Make sure everyone is acting under their own real-world identities. People less likely to commit fraud or engage in other types of anti-social behavior if they must do so under their verified real-life identity. Also, if this type of behavior is reported on your platform you can ban the real-world identity of an individual and therefore keep them off your platform permanently. Most fraud is committed by repeat offenders who have figured out there is little direct consequence to their real-life persona when a fraud scheme is uncovered and shut down. As a bonus, when people act under their own identities it gives your platform, and your customers, real people to pursue to receive monetary damages.
Authenteq provides a solution that allows you to verify the real-life identity of all people transacting on your platform. Each verification takes less than 60 seconds and is highly accurate. Authenteq even provides a selfie authentication method that through the use of facial biometric can reestablish trust in a person’s identity at any time deemed necessary. Our solutions can be integrated directly into your native application or website in less than a day.
To learn more about how Authenteq can secure your short-term rental business from fraud contact our Identity Verification experts.