How Credit Privacy Numbers (CPN) Impact Screening

NAA posted an interesting article about CPNs that explains what they are and why apartment managers need to be aware of them.

Through ads targeting high-risk individuals, groups selling CPNs entice individuals with claims of a clean credit slate and most commonly, the car, house or apartment that is beyond reach. For approximately $150 to $250, a group such as CPN Direct will provide the buyer with a “clean” 9-digit CPN which can be used in place of their existing SSN on credit, loan and lease applications. Included within each CPN package are credit lines that have been opened and maintained to establish good credit — often in the 750 range — for the buyer.

Using CPNs in place of an SSN in a financial transaction is a federal crime, according to the Federal Trade Commission — and for good reason. CPNs are directly tied to predatory identity theft practices that target children, the elderly and those incarcerated for long periods of time, and aim to build credit off of the victims’ stolen Social Security numbers. With each victim group, it often is years after the events that the crime is recognized, often crippling the victims’ financial wellbeing…

Unlike other fraud schemes such as chip reading, which focuses on flash scams, CPNs and Synthetic Identity fraud are designed for major transactions, including apartment rentals. While the cost of a resident skipping or being evicted varies greatly by market, the cost to prematurely turn an apartment is universally a burden of time and finances for a management company. Compounding the risk of fraudulent lease activity are secondary risks to premise liability that all rental housing operators must factor in.

Best Screening Practices to Minimize Risk

Property Management Insider has a nice, 7-part list of the best screening practices to minimize risk. Here are just a couple:

2. Reduce subjective decision-making at the community level
Use automatic approvals based on your company’s rental criteria to simplify the move-in process and reduce individual decision-making, thereby reducing fair housing violation risk. Reserve manual approvals for borderline applicants and restrict the ability to perform them to authorized users…

4. Separate criteria for applicants and guarantors
Bad applicants should not be buried under exceptional guarantors. After all, the guarantor isn’t the one who’ll be living in your community…

Here’s a link to the full list, which also includes some tips about setting criteria customized for each community.