No doubt you’ve heard of the three-card monte, a confidence game in which the players are tricked into betting a sum of money on the assumption that they can find the “money card” among three face-down playing cards.
Now comes the “three-round burst,” a trick identified in a recent Federal Trade Commission case in which a so-called credit repair company disputes all of the negative items in someone’s credit records, not once, not twice but three times until it all but bullies the credit agency into finally giving into the request to delete the items in question.
It’s a “credit washing” trick that is rampant in the auto lending sector, according to Point Perspective, a risk management company. It’s now starting to permeate the mortgage sector and if it hasn’t already, it’s likely heading to multifamily.
In April, the FTC obtained an injunction against Turbo Solutions, which also goes by the name Alex Miller Credit Repair, and Miller himself to halt what it alleged is a deceptive credit repair scheme that claimed it could repair consumers’ credit. Of course, it often failed to deliver.
The outfit claimed it could remove negative information from people’s credit histories through “advanced disputing.” But the FTC says Turbo and Miller were engaged in credit washing, which is a systematic method for disputing negative tradelines under false pretenses. One fake claim involves filing an affidavit saying you are a victim of identity theft.
The FTC charges that the company would file identity theft claims on the consumer watchdog agency’s website, IdentityTheft.gov, to dispute tradelines, sometimes with the consumer’s knowledge.
When a credit reporting agency suspects that an identify theft report was wrongly filed, it can decline to remove negative items from its files. But that didn’t stop Miller and his companies.
Instead, they would get credit reporting companies to comply by filing the same identity theft claim, over and over again, until they relented.
Credit washing, which is defined as a systematic cleansing of an applicant’s negative tradelines by claiming identity theft on all accounts, is a big business. But it’s not limited to the type of hectoring alleged by the FTC in the Miller case. According to Point Perspective, it also includes using credit privacy numbers to create a new, clean credit file that fails to reflect the applicant’s true credit history and artificially boosting someone’s credit score.
There are other types of fraud that landlords and property management firms should know about, too.
Point Perspective, which utilizes artificial intelligence to root out fraud, says it has identified more than 6,700 fake employers that, in the auto sector alone, are tied to more than $1.7 billion in financing applications. And the risk management company says it identifies “up to 100 new fraudulent employers” every week.
These issues are tied to fake websites and forged pay stubs, and are often used to lure lenders into calling fake phone numbers to verify an applicant’s false employer.
In addition, the risk management company reports that of those applicants who used fake employers also used false credit files, aka synthetic identifies.
As you might expect, applicants using false credentials put businesses at risk. In the auto sector, they have a 40 percent to 100 percent default rate. In the apartment sector, this could leave landlords without rent payments and could bring criminal activity to these communities.
“IdentifyTheft.gov is a resource for consumers, not scammers,” the director of the FTC’s Bureau of Consumer Protection, Samuel Levine, said in a statement announcing the Turbo/Miller injunction. “Those who abuse this resource by filing fake reports can expect to hear from us.”
The Justice Department also vowed to use “all tools” at its disposal to stop credit repair firms from engaging in this kind of unlawful conduct.
Nevertheless, it would be wise for multifamily interests to take heed. Rather than wait for an attack, property managers should take whatever steps they deem necessary to insulate themselves from these types of issues. To turn a blind eye could be costly.