The Property Managers Guide to “True Fraud” Chargebacks

True Fraud Chargebacks Short-Term Rentals

Much like the TV show True Detective (if you haven’t seen it, you should), True Fraud deals with criminals and much like TV Show True Detective, True Fraud is not a joke. 


Unlike “friendly-fraud”, chargebacks related to true fraud (or identity fraud as some call it) happen when a reservation is made using stolen information like a credit card or a stolen identity.  


The criminals that participate in these types of fraud are usually are in a syndicate where stolen identities and credit cards are bought and sold in bulk. 


“True Fraud” related chargebacks are the most common types of chargebacks and the easiest types of chargebacks to prevent, assuming you have the proper software and processes in place (like Guest Ranger  😉 ), but if you don’t, it can be the most type of chargeback damaging, not just financially, but in almost every aspect of your business.


Identity Fraud Statistics


There are some alarming statistics related to identity fraud:


  • 1-in-15 people experience identity theft
  • In 2021, Americans lost more than 56 billion dollars due to identity fraud
  • Access to stolen data has never been easier given that it’s sold for less than .50 per card in nefarious online marketplaces
  • Identity scams are the most common form of scams, followed by imposter scams
  • People between the age of 30-39 are the most prevalent targets for identity theft
  • Holidays are when fraud usually peaks 


How Does Identity Fraud Impact Short-Term Rentals?


When I wrote the title for this paragraph, I thought the question should be obvious, but I think it’s very important to emphasize the many consequences that booking a fraudulent reservation can possibly have:


  • loss of revenue
  • angry owners/loss of owners trust
  • increased reservation back-log 
  • damaged contents (If they are actively breaking the law by using a stolen identity or financial information, I doubt they’re going to pay attention to your policies.)
  • stolen items
  • your unit being a potential site for criminal activity
  • negative publicity for your company 


Even though all these are significant losses, the most important one is the loss of credibility in your local community. I’m sure you already know that, currently, our industry is being “audited” by local & state governments with the aim the aim of restricting short-term rentals. Aside from hotel lobbies, the main antagonists in this narrative are HOA’s & angry neighbors.


If you’re actively booking guests without screening or verifying them, you’re risking the chances of booking a criminal & damage-prone guest that is most likely going to be worse than a “noisy guest” and one that could be committing illegal acts in your rental (that I’m sure your neighbors would be notified of).


This leaves a stain in our industry that we’re currently trying to combat.


It’s our responsibility as an industry to put in a good light, otherwise, there might not be an industry to begin with, and the first step towards that process is proper guest screening and verification practices.


Quantifying the Loss of True Fraud


We covered this in the last section, but I think it’s absolutely crucial to understand just how much revenue you can lose from one fraudulent reservation, so let’s quantify this through an example:


Let’s say you have a reservation for $2,000 which resulted in a true fraud chargeback.


That’s $2,000 out the window. 


But… the guest also damaged the TV, furniture, and for some reason, the coffee maker & the door, that’s another $2,000 out of the window (I’m being conservative with the price).


Oh, and the owner is upset that you let a criminal stay and damage his rental, so you lost a unit, that’s $100,000 in annual revenue out of the window (again, conservative estimate).


A reservation for $2,000 resulted in over a $100,000 loss because of a lack of a fraud-verification process.


How to Prevent True Fraud Chargebacks


We’ve talked about what true fraud chargebacks are and why you should avoid them at all costs, but how do you prevent them?


Well, to put it as simple as I can, the best way to prevent identity fraud is to verify the guests identity. It sounds simple, but it’s easier said than done. 


There are so many variables and factors that go into this, for example:


  1. Are you asking your guests for a valid document (driver license or passport)
  2. Are you making sure that you are compliant with data-regulations in how your storing it?
  3. Are you verifying the legitimacy of the document to make sure it’s not fake?
  4. Are you following-up with the guest to make sure they submit their document before check-in?
  5. Are you verifying the guests name to the card?
  6. Are you verifying the guests age on the ID (that you have to verify is legitimate) to your minimum requirement?
  7. Are you looking matching the guests name, address, and phone to databases to make sure it’s real and not made up?


These are just a few things you have to do to combat identity fraud. If you also deal with a large volume of reservations, it can get very tricky doing these minute detail-oriented tasks as they get multiplied on top of each other and if done wrong, can result in thousands of dollars in lost revenue.


The Best Way to Prevent Identity Fraud


The most effective way to prevent identity fraud is through automated software that uses a  combination of frictionless verification methods like address checks (Guest Ranger feature 🙂) and friction-based verification methods such as selfie and ID checks backed by machine algorithms (Guest Ranger feature 🙂). (If you don’t know what friction is in the context of fraud prevention, you can find out by clicking here)


It’s also important to screen guests that have fraud-related offenses or felonies (another feature of ours). Although having a fraud-related offense or felony doesn’t necessary mean you’re going to commit fraud, it’s certainly something to be notified of.  


Verifying the name on the ID to the credit card (another Guest Ranger feature 🙂) is another method to make sure that the guest is not using stolen information




Out of all chargebacks, true fraud is probably the easiest to prevent assuming you have a fraud-verification process in place.


By implementing the strategies discussed, you can significantly lower your risk of experiencing a charge-back due to true fraud.


Also, don’t forget to watch True Detective



Contact a member of our team today for a more in-depth explanation of True Fraud to see how Guest Ranger can prevent it.