Change of tenancy fraud is a major issue for utility companies, negatively impacting their cost effectiveness, efficiency and ability to provide the optimum service to their customer base.
In basic terms, change of tenancy fraud occurs when a period of tenancy and energy use is attributed to another person or tenant. This can be a relatively commonplace occurrence when, for example, people genuinely move into a property but provide a false date of occupancy to their utilities providers to avoid paying bills for a certain period. While this constitutes fraud, there are far more serious examples of change of tenancy fraud. For example, an occupier may declare they have moved out of a residence while remaining in the property and eluding the debt owed under the previous period.
As with nearly all cases of fraud, the scale of tenancy fraud is hugely understated. Some businesses have estimated it could be as high as 18 per cent of their bad debt problems. The main challenges of tenancy fraud are the difficulty in locating the responsible debtor and the energy, time and cost associated with collection. This is because there is no widely used or definitive method of detecting, measuring and tackling the problem.
Individuals can often go to extraordinary lengths to avoid paying utility bills. In one particular case in the UK, a perpetrator lived in a house that had previously been two semi-detached houses. The interior dividing wall had been knocked down but the two front doors had remained in place. A strategy was employed by the occupier to open the “neighbouring door” whenever a collections agent knocked at the door and have a “neighbour” tell the collector that the occupant they were looking for had moved out.
Utility companies have developed strategies to spot this type of fraud, using geolocation details customers provide and measuring the levels of energy used by “the occupier”. However, these methods are not comprehensive and can commonly lead to “false positive” results. As a consumer credit agency, we’ve been working to tackle the issue, exploring ways in which data assets from diverse sources can add accuracy to the identification process.
The use of data is being incorporated to help trace people, confirm residencies and build cases. Identifying change of tenancy fraud with accuracy at an early stage in the process mean utility companies can take distinct and decisive action, limiting the resource burn on investigative actions while improving profitability and level of service for law abiding customers.
From a legal and regulatory perspective, it’s difficult to enforce a tight identity verification policy across all of society and there’s a data lag with changing addresses on utility accounts that places ownership of debt into a state of flux. If an individual moves to another residence where the same utility company is contracted to provide services, the provider can establish a clear link that helps identify and track down overdue debt. Confirming data at an individual’s previous address can also provide a chain of identity, making it easier to establish the right person to contract with.
In potential cases of change of tenancy fraud, there is usually a mix of circumstances that indicate suspicious activity. This is an area where wider data assets can add true value in discerning which cases need further investigation. For example, having access to and using multiple data metrics such as residency periods records, electoral role information, property sales and rental data, alongside information supplied by fraud sharing networks, can create a more detailed picture to help utility companies minimise and recover bad debts.
This type of fraud can now be tackled through the use of the computing power available in “big data” engines, empowering utility companies with greater speed and flexibility. Highly intuitive, bespoke suites of data-driven solutions that incorporate the use of AI can now be employed to detect fraud more accurately. The systems are built to evolve, grow, learn and constantly adapt to become increasingly proficient at detecting fraud and identifying the individuals behind the crime.
Fraud detection is a perpetual game of cat and mouse, with fraud occurring wherever utility providers have weaknesses in their defences. Fraudsters are notoriously resourceful and savvy when it comes to identifying new and novel ways to “rig the system”, reiterating the importance of a flexible, adaptable system to fight the problem. To remain one step ahead of the fraudsters, utility providers need to harness the latest data-rich tools in fraud detection to reduce the cost of bad debts.