Vacation Home Rental Fraud
The rise of the sharing economy helped drive $16 billion in revenue for the US vacation rental market in 2017, with projections that it will top $23 billion by 2022. And where there’s online revenue, there’s online fraud.
- Fraudsters pose as vacation home owners and post entirely fictitious properties online. They collect up-front “security deposits” and before consumers realize that they’ve been duped, the fraudsters disappear.
- Fraudsters use stolen credit cards to book desirable vacation home sites. They then resell the bookings on secondary marketplaces, Craigslist, or pose as the actual owners of the properties on legitimate marketplaces. The fraudsters sell and resell each “booking” multiple times, multiplying their ill-gotten gains many times over.
- In account takeover scams, fraudsters take control of the marketplace accounts of legitimate vacation home owners. Vacationers make their reservations and submit payment through the online portal. The vacation home owners are then notified of the rentals and prepare the vacation homes for the vacationers’ arrivals, but the fraudsters divert the funds to accounts the fraudsters own (not the legitimate owners’ merchant accounts).
- Fraudsters operate spoof sites that simulate legitimate sites using stolen cascading style sheet (CSS) code. Or fraudsters develop spoof sites look like real marketplaces by using stolen listings scraped from legitimate sites. When unsuspecting consumers mistype the web addresses to legitimate sites, or click the links to spoof marketplaces, they arrive at what appear to be trustworthy online destinations. Instead, their payments get stolen.
The good news? There are a number of steps that vacation home marketplaces and technology platforms can take to fight back:
- Keep fraudsters and fraudulent listings out of your marketplace. Enterprise-class fraud prevention solutions can be used to dramatically reduce the cost and hassle of vetting new property owner accounts. Fraudsters tend to use and re-use IP addresses, devices, ISPs, proxies, etc. They also exhibit behaviors that are detectable by advanced capabilities like Artificial Intelligence (AI) and Machine Learning technology. Enterprise-class fraud prevention solutions use this knowledge to identify and block fraudsters BEFORE they can set up accounts. This helps vacation home marketplaces avoid wasting time and effort on vetting fraudulent account set ups.
- Prevent account takeovers. Account takeovers increased 61% and generated $2.3 billion in losses in 2016. Fortunately, enterprise-class fraud prevention solutions like Kount Access employ advanced technologies that detect and block fraudsters who try to pass themselves off as the true account owners, even if the fraudsters possess the actual login credentials.
- Avoid merchant errors that cause innocent “friendly fraud.” Friendly fraud gets its name from the term “friendly fire,” because friendly fraud harms the consumer’s supposed “allies” (issuer, acquirer and merchant). Merchant errors can cause innocent (but still harmful) friendly fraud chargebacks. For example, if the cardholder does not recognize the description on their billing statement (e.g., it’s the name of the property agent instead of the vacation rental marketplace), they may mistakenly file a chargeback. Make sure to communicate this type of billing information clearly with customers to prevent chargebacks from being filed by mistake.
- Win against malicious “friendly fraud” with data evidence. Enterprise-class fraud prevention solutions—especially those that offer integrated chargeback management services—can provide the evidence needed to win representments when consumers try to avoid late cancellation fees, dodge legitimate damage/cleaning fees, or blatantly lie to avoid paying for a rental. Generally speaking, the higher the number of discrete data elements that can be associated with a transaction, the greater the chances of representment success.
- Monitor for spoof sites. Regularly check for URLs that are one mistyped character different than your URL and report offenders to the United States Computer Emergency Readiness Team (US-CERT).
- Avoid false positives. With card-not-present (CNP) fraud increasing 40% in 2016, the impulse for marketplaces to tighten fraud controls and reject borderline orders is understandable. However, a study by Javelin found that at least 15% of all cardholders have had at least one transaction incorrectly declined. Make sure your fraud prevention makes it easy to optimize the balance between the three areas impacted by fraud: Direct Loss, Direct Cost and Revenue Loss.
Vacation rental fraud is a serious and rapidly growing issue. Before it gets out of hand, get proactive in protecting your customers, your reputation, and your profits. Learn more by downloading the eBook "Protect Your Merchants, Protect Your Profits".