Screening Topics Screening Topics

Larry NewcomerDirector

Domin-8 Value Added Services

This session is designedfor current Domin-8

Background Screening Users

© 2009 Domin-8 Enterprise Solutions LLC. All rights reserved.

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Agenda

• Current Trends• What is your screening profile and why might

it need attention?• Maximizing your screening results• Know your applicant: Identity Verification• Federal Trade Commission’s new “Red Flag”

rules• A look ahead• Your questions

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Screening in Today’s Market

• How has the current economic client affected your applicants?

• Headlines point to higher unemployment, foreclosures and growing consumer debt.

• So applicant credit quality should follow, right?

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Screening in Today’s Market

Analysis of Applicants – Last 6 months vs. previous• Surprisingly, the average applicant credit profile

has actually improved slightly

Last 6 Months

Previous 6 Months

Average Credit Score 613 596

Average Past Due Debt $231 $254

Landlord Collections (per 1,000 applicants) 68 73

Utility Collections (per 1,000 applicants) 150 160

All Collections (per 1,000 applicants) 3145 3495

Bankruptcies (per 1,000 applicants) 87.5 100

Evictions (per 1,000 applicants) 65 70

Average Tradeline Rating (1 is best) 2.24 2.43

Source: Domin-8 Enterprise Solutions Screening Data, September 1, 2009; Rental Applicants Only

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Screening in Today’s Market

From a broader perspective• Increase in credit scores across all geographies,

during the March 2009 to June 2009 time period, BUT…

• For the third straight month the percent of credit scores rising has tapered off and more consumers are seeing their credit scores remain stable.

(source: CreditKarma)

• Currently, people with higher credit scores maintain more stable credit scores while those with marginal credit scores tend to be in flux.

• Younger people scores see the highest increase, while older people tend to have more stable credit.

• Geographic fluctuations may increase, as some areas experience larger economic changes such as job loss, foreclosure, bankruptcy or impacts of the economic stimulus plans.

(source: Equifax)

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Screening in Today’s Market

• What’s ahead?– BusinessWeek - July 14, 2009

• Credit Scores Will Keep Dropping• Even though the recession is more than a year

old, it is only recently that credit scores began dropping

• Credit scores have just begun to fall dramatically as banks and jobs keep tightening

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Your screening profile…does it need attention?• Your company’s screening profile defines the

minimum standard for acceptable applicants• Some companies are re-evaluating resident selection

criteria in light of the current economy.– Balancing risk vs. occupancy– Slightly loosening credit criteria…more focus on factors

that tend to be predictive of short term behavior• Focus on landlord/tenant records (evictions, landlord

collections)• Foreclosure forgiveness• Shorter time horizons

• Remember, bankruptcy laws have changed• If you see a rising number of declines and

overrides…– Overrides introduces higher subjectivity…and fair

housing risk– Let us know if you need a screening profile review

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Maximizing your screening results

• Always examine the report…even when approved– Look at ID section for “Red Flags”– Check residence history. Is there another previous

residence that should be verified?– OFAC alerts– We return “Serious Criminal Records Matching on

Name Only”. Usually not the applicant, but just in case.

• Not used in the decision since we can’t match the record on anything other than the name.

• Usually occurs with very common names.• Often a photo returned with the record.

• We check for known aliases and run additional criminal checks if any last names found are different.

• Identity information on the application may not be as strong as what is on the Government issued ID.

• You can decline an applicant in screening if they fail Identity Verification

Sex Offender Sex Offender

Records in 9 states

Records in 9 states

don’t provide a don’t provide a

specific DOB…specific DOB…

Hawaii doesn’t Hawaii doesn’t

provide any age

provide any age

informationsinformations

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Maximizing your screening results

• Domin-8 Background Screening incorporates:– Non-proprietary, industry leading data sources

• CSC Credit Services and Equifax• backgroundchecks.com criminal data

– Industry Leading 542 Sources• LexisNexis eviction records

– Sourced from billions of public court records• LexisNexis Instant ID Verification

– Billions of records and thousands of independent data sources

– Advanced Screening Options• Adds direct to the jurisdiction search• Recommended to aid the “formidable line of

defense” minded• Especially important in areas where criminal records

are less available to third party data bases

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Know your applicant: Identity Verification• Why is Identity Verification important?

– Is the applicant being truthful?– Is there info they don’t want you to know?

• Previous landlord• Criminal record• Eviction• Other credit issues

– Are they hiding behind someone else’s identity?

– Is the applicant’s info difficult to read on the application?

– Can a digit in the SSN or date of birth be mis-keyed?

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How does Identity Verification work?

• Most adults in the United States have some ‘footprint’ in public and non-public databases through credit accounts, phone records, shipments, address records, etc.

• Mis-information on the application usually comes in the form of one inconsistent data element– Transposed numbers in SSN– Different last name– Altered date of birth– Phony, temporary of previous address

• Input information is checked against this database• Inconsistencies flagged…identity verification score

(risk index)• Can be a test, that if failed, stops the screening

process

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How does Identity Verification work? (continued)

• Common identity issues to watch for:– Multiple or other names associated with the

SSN. These may be legitimate in situations such as newly married spouses with new last names

– Fraudulent Social Security Numbers. Some people will try transposing numbers in their SSN, use a friend or relative’s SSN, or make up an SSN.

– Input address may be a previous address. If the applicant doesn’t want you to know where they last lived, often they will provide a previous address.

– Unverifiable Date of Birth. To avoid detection, some may use a transposed or made-up Date of Birth

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How does Identity Verification work? (continued)

• Some applicants may legitimately have unverifiable identity information– Applicants who are very young and just

starting out– Special care residents– Elderly spouses– New immigrants may not have had the

opportunity to establish themselves in US consumer information databases.

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Getting the most from Identity Verification • Check the input• Info from ID vs. Application• If your software has a separate field for middle name or

initial, enter that information as often as possible. Middle names or initials are very important, especially when the person’s first and last name is very common.

• Use the name as it appears on the government issued ID whenever possible

• If the person is very recently married, use the maiden name. If the newlywed is now using a compound or hyphenated last name, consider using only the maiden part of the last name.

• For Hispanic culture names, where a primary and secondary last name is used, only enter the primary or first last name. For example, if the last name provided is Lopez Martinez, enter Lopez only as the last name.

• If your software does not have a separate field for name suffixes, do not enter them in the last name field. Suffixes include Jr. or Junior, Sr. or Senior, or II or III, etc.

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Social Security Numbers and ITINs

• SSNs are, of course, important in verifying the identity of an applicant and returning accurate screening results.– We recommend requiring– Never enter a random SSN. Leave blank or use and obvious

substitute SSN such as 000-00-0000.– A random SSN will Identity Verification issues, possibly

return inaccurate information, mis-identification of credit history or even delay your result.

– May trigger an Identity Theft Red Flag• Individual Tax Identification Numbers (ITIN)

– 9 digit numbers that are formatted like SSNs and are issued by the IRS for foreign nationals.

– ITIN may be entered in lieu of a SSN, however, they do not aid in the Identity Verification process IF associated with credit info.

– If the applicant with an ITIN has established any credit associated with that ITIN, including the ITIN in the SSN field may help find such credit records.

• As identity theft increases, more SSN’s will have multiple names associated.

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Entering addresses

• Use a complete street address and become familiar with US Postal Service (USPS) formats and abbreviations – Most addresses in public records have been

standardized to USPS standards.

• Never guess at the zip code• Never use PO Boxes or temporary addresses

such as motels or the address someone is living with temporarily. Use the last known established address if possible.– Keep track of temporary address for

correspondance and AAL.

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More precision in entering applicant info = better screening results

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FTC Red Flag Rules

• Consult with your attorney. This is not legal advice.

• Part of the 2003 Fair and Accurate Credit Transactions Act or FACTA

• Commonly known as the “Red Flag” and Address Discrepancy Rule

• Overall objective is to prompt businesses to take additional steps to authenticate a person’s identity when certain warning signs of potential id theft are present.– A Red Flag occurs when a key element of a

provided person’s identity is inconsistent with information found primarily in credit files.

– Names, addresses, SSNs, date of birth • Rules effective date delayed until November 1,

2009

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FTC Red Flag Rules

• NMHC Guideline statement:– “While apartment owners solely engaged in

the business of renting apartments are not expressly obliged to comply with the rule in its entirety, given the complex nature of some business operations, firms are encouraged to familiarize themselves with the entire rule and to consult with counsel to ensure their overall compliance obligations.”

Pretty vague? This part seems pretty clear…

– Civil fines of up to $2,500 per violation for knowing violations of the rule that constitute a pattern or practice.

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FTC Red Flag Rules

• NMHC Guideline statement (cont’d):– The apartment industry as "users" and

"furnishers" of credit report files, have more limited compliance obligations, but they are still extremely important.

– Landlords are obliged to comply with the third section of the rule that implements Section 315 of the FACT Act and applies to users of credit reports.

– Section 315 of the FACT Act requires users of consumer reports to develop reasonable policies and procedures that they must apply when they receive a notice of address discrepancy from a consumer reporting agency.

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FTC Red Flag Rules

• No apparent requirement to report Red Flags to Credit Bureaus unless you are reporting accounts today.

• List of compliance provisions apartment firms should include in their screening process and ID theft programs.

– Data Destruction. The FTC’s Data Disposal Requirements require firms that use consumer reports, or information derived from such reports, to take "reasonable measures" to protect against unauthorized access to such data during disposal.

– Adverse Action Notice. When firms take an adverse action based solely or partly on the basis of the information derived from a consumer credit report, they must provide a notice of this action to the consumer.

– Law Enforcement Requests. Firms must comply with requests from law enforcement officials to turn over any records related to a transaction that may involve identity theft such as rental applications.

– Debt Collection Prohibition. Property owners and managers are prohibited from pursuing debt collection efforts with a third party if notice had been provided to the owner that the debt is the result of identity theft.

– Refurnishing Information Prohibition. Once property owners are notified by a consumer reporting agency (CRA) that consumer information provided by the owner is the result of identity theft, owners are prohibited from refurnishing that information to anyone else.

– Reinvestigation of Consumer Information. Under certain conditions, property owners will be required to reinvestigate the accuracy of information provided to a CRA if it is disputed by the consumer as being the result of identity fraud.

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FTC Red Flag Rules

• No express requirement that the required policies and procedures on address discrepancies be in writing.

• However, to ensure appropriate measures are being followed by employees company-wide, and to reduce the potential for violation, a written policy is highly recommended.

• Red Flag events your policy should cover:– Suspicious Documents– Identification is not consistent with information

provided by the person or information that is on file with the financial institution or creditor

– Address does not match any address in the consumer report

– Social Security number (SSN) has not been issued, or is listed on the Social Security Administration’s Death Master File.

– Personal identifying information provided is of a type commonly associated with fraudulent activity (Transient or fictitious address, PO Box, etc.)

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Key Elements of a Red Flag Program• IDENTIFY

– Identify red flags or ID theft warning signs relevant to apartment business operations.

• DETECT– Monitor business operations to assess or detect the

occurrence of one or more of your company identified red flags.

• RESPOND– Implement the appropriate response based on red

flag(s) detected.• REPORT

– If red flag is an address discrepancy and you meet criteria, report accurate information to CRA.

• UPDATE– Review effectiveness of your program and update

annually.

Source: NMHC Publication "Red Flags" and "Address Discrepancy" Rules Quick Reference Steps to Compliance

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Overview of a Red Flag Program

Source: NMHC Publication "Red Flags" and "Address Discrepancy" Rules Quick Reference Steps to Compliance

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Domin-8 Screening Red Flag Features

• Decline based on Identification failure– Insures appropriate attention given

• Discrepancies noted on report– Note: Discrepancies don’t necessarily hinder a

successful background check…– Lets look at some examples…

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SuspiciousAddress

Alert

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Potential UseOf Previous

Address

Valid Street Address

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A look ahead…• Web accessible Management Reports

– Screening Recap Report• Single property or groups• Recaps Applicant Quality/Demographics, Results• Variable time horizons• Future?

– Bad, ex-resident analysis

– Override analysis– Others?

• Marketing Source Analysis• Zip Code Analysis

• Rental Payment History– Use history in decisions– Provide history

• Decisioning Profile Maintenance• Criminal Monitoring and Alert• Option for AALs in Spanish

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Questions?