How to Nail Proof of Address in Your Address Verification Process
80 to 85 percent of recent identity fraud is synthetic identity theft, according to the U.S. Federal Trade Commission. Synthetic fraud is when a fraudster uses a combination of fake and real information to create a brand new identity. It’s just one example of why proof of occupancy is increasingly critical. Without address verification, a criminal could get away with taking someone’s address and pairing it with someone else’s Social Security number.
Synthetic fraud isn’t the only reason that businesses should focus on their address verification processes. Over the course of 2019, a CoreLogic study revealed that occupancy fraud risks had steadily declined. However, this form of mortgage fraud is still an issue for lenders. Using proof of occupancy as a form of identity verification not only helps you stay compliant with security and consumer regulations, but it also saves your business from otherwise unavoidable risks. Here’s how you can hit the target.
Why is proof of address a necessity?
Dodge avoidable risks
In order to fully understand the importance of verifying your customers’ addresses, we need only look at the variety of different industries that benefit. Proving consumers’ addresses is an efficient way for businesses like mortgage lenders, eCommerce stores, online marketplaces, and online gaming and gambling sites to be absolutely sure of their customers’ identities.
Let’s look at Airbnb, the online platform that facilitates the process of booking private living spaces for travelers, as a use case. Within the past year or so, Airbnb has experienced a rise in fictitious hosts – causing customers to get scammed out of multiple housing properties. Because Airbnb didn’t properly verify that hosts lived where they said they lived, hosts could list a property down the street as the rental, only to reveal an inferior space as the real address later.
Online rental platforms aren’t the only digital services that require proof of address. Mortgage lenders also depend on proof of occupancy documentation to ensure loan requirements are being met. To mitigate fraud and default risks, FHA, VA, and USDA borrowers must provide lenders with documents to verify that they are using newly purchased properties as their primary residence.
High-value eCommerce transactions also need occupancy verification so that, for example, a car or expensive piece of equipment doesn’t get sent to the wrong place. Think of it like this: as online transactions increase in value, so does the risk of fraud and thereby the need for security.
Regulations and security
There are ways to avoid the costs of fraud, and it starts with following identity regulations. As you add verification methods to stay compliant with KYC, KYB, AML, and mortgage lending regulations, you weed out security threats, minimize fraud risks, avoid legal complications, and confidently expand your customer base at the same time.
Proof of occupancy is a basic requirement for KYC/KYB and AML compliance in most jurisdictions. However, some regions are more likely to legally mandate address verification than others. Hong Kong, for instance, does not require proof of address, mainly because residents often change addresses and documents can easily be forged. States in the U.S. where online gambling is legal, on the other hand, strictly require proof of address, risking hefty fines otherwise.
FHA, VA, and USDA loans often have lower down payments and credit score requirements, making them more appealing than conventional mortgages. To prevent investors and homeowners from taking advantage of these benefits and using the property as a rental, vacation home, or investment property, borrowers must move into the home within 60 days of purchasing it and must occupy the residence for at least a year. Proof of occupancy allows lenders to verify this information.
Here’s how address verification works
In the U.S., there are a few different ways a business can confirm addresses. These are the most commonly used documents for verification:
- Driver’s license
- Bank statement
- Utility bill
A driver’s license is an official government identification document that permits an individual to operate a vehicle. Aside from an individual’s driving record, a license has their name, address and birthday on it. But what happens if their address isn’t current?
Roughly 35.5 million Americans move each year. Technically, every state in the U.S. requires anyone who moves to update their license within 30 days. But most people tend to overlook this minor task, making a large handful of addresses incorrect and outdated.
Next to outdated information, another downside of using a driver’s license for proof of address is that they are easy to fake. In the 2016 Uber data breach, a hacker stole 600,000 Uber drivers’ license numbers. Thousands of fraudulent license numbers are still in use today.
A passport is the gateway to international travel. It’s a government document that certifies the identity and nationality for an individual. Believe it or not, passports don’t actually print out current addresses on them. There’s just a space for the owner to pencil their address in.
This can be beneficial for consumers because a passport is valid for 10 years, and the chances of them moving at least once since they first got their passport are very high. Of course, this also means that there’s no way of really telling how accurate (and up to date) an address listed on a passport is.
A bank statement is a monthly document – issued by a bank – where a consumer’s transaction activity lives. It shows how much money went in and out of their bank account. This statement is qualified to verify addresses because it provides a consumer’s name, address, and statement period.
Unfortunately, in most cases, the statement won’t be qualified if it’s older than three months. An old bank statement cannot prove the most recent address of your customer.
Then there’s the fight of losing consumers to security concerns. When asking new customers to verify their address with a bank statement, financial services applications in Europe have seen 38 percent immediately abandon the transaction. Consumers don’t want to provide such sensitive information, especially for something as simple as proof of address.
Utility bills have been used as a form of proof of occupancy for a while now. For instance, almost everyone is familiar with bringing a piece of mail – likely a utility bill – to the DMV when getting or renewing their driver’s license. Now, the process is becoming digital.
In terms of recency, this is the strongest data point for the use case of occupancy verification. Utility bills provide the most recent address of a consumer. While people may forget to update their address on their driver’s license or passport, they’re very unlikely to keep paying the electric bill every month for a place in which they no longer reside.
A verification method you can trust
There are a few different ways out there to capture utility bills for the purpose of verifying addresses.
You can allow your consumers to opt in to personally submit their utility bills by scanning or sending in a photo of their bill into your database. Although this seems like a convenient route, it’s not the safest. It’s surprisingly easy to forge a scanned or photographed utility bill – all you need is Photoshop.
NCTUE is a database that reports payment history for cable, telecom, and utility accounts. This is a common resource for several forms of identity verification, but it has its drawbacks, too. Only paid members can access the database, and NCTUE does not guarantee that the utility bills reported are the most recent.
Urjanet connects directly to thousands of utility providers to automate utility bill capture. Through a cloud-based system, Urjanet collects utility bills directly from the provider – bypassing any chance for someone to tamper with the data.
At the end of the day, your verification methods are only as accurate as your data sources. If you’re relying on easily forged or outdated information, you can’t really be sure that your customer lives where they say they live. So, stay up to date with Urjanet’s seamless, on-demand address verification solution, and be sure that your verification process maps the way to a secure, fraud-free future.
Looking for more information on how to use utility data for address verification? Contact us today to speak with our team and schedule a live demo.
You may also like:
- Friction Is the Future: High Risk, High Security ID Verification
- Utility Bill Identity Verification for the 21st Century
- KYC Compliance: The Building Block to Verifying Customer Identity
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About Asia Casey
Asia Casey is a Marketing Intern at Urjanet who has a passion for communication and writing. When she's not at Urjanet, she can be found studying public relations at the University of Georgia.