10 Ways to Catch Fraudulent Applications

By Robert L. Cain, Copyright 2020 Cain Publications, Inc.

One in three rental applications contain some kind of fraud, reports snappt.com. in 2020, the company surveyed property managers and came up with that figure and others just as telling revealing the carefully generated fake documents landlords see on rental applications.  It’s usually income, but it can be far more devious than that. Of those who admit it, says the snappt.com report, two of every three property managers have been fooled at some time by phony documents.

It’s easy to create a phony document, one that will fool many people, including landlords anxious to get a unit rented.  Time was when tenants had to work harder to come up with doctored documents to prove their rent-worthiness.  Now all it takes is a visit to a website.

Get It Rented!: Little-known tricks and secrets of marketing rental property to attract good tenants in good times and bad by [Robert L. Cain]

I checked out a few of those websites.  Fakepaystubs.net, pay-stubs.com, and thepaystubs.com all promise quick and easy documents to prove whatever you want proved. Fakepaystubs.com, for example, provides instruction and services for

“How to edit my paycheck stub
How to get my check stub online
Create a pay stub
How to edit a scanned document
Online PDF Editor
PDF Editor Service for Paystubs
Editing Scanned Documents
The PDF Editor Service
Editing Fake Paystubs Service
Editor of Fake Paystubs Service”

In addition, beside fake paystubs, they will create bank statements, credit reports, utility bills, credit card statements, and tax returns, running the gamut of documents meant to fool the less than diligent landlord.   Of course, they insist that they are just for fun and should never be used in real life; “Services provided here are only for Novelty, Education and Entertainment purposes.”  Another site even offers two people pretending to be employers and previous landlords to answer calls from anyone checking the application.

All of this has become epidemic recently because of how easy it is to create documents online.  With due diligence, you can easily flush out fraudulent documents and applications. The most important point is: BELIEVE NOTHING ON A RENTAL APPLICATION UNTIL YOU HAVE VERIFIED IT.

Find out after they have completed their fraud and moved in, and you most certainly have the right to evict these tenants, assuming you can actually still evict where your property is.  The average eviction though, reported the Snappt.com survey, costs $7,685.  And that’s just for the cost of the actual eviction.  It doesn’t include the lost rent and property damage done by a bad tenant. Never allowing them move to in to begin with provides the best protection for your investment.

Here are 10 things to do to ferret out a fraudulent application and keep from renting to a lying tenant.

  1. Make sure the application is completely filled out, no exceptions.  If your applicant has a bad attitude about your insisting it’s completely filled out, simply reject the application.
  2. How do the documents your applicant submits look? Are the numbers, account numbers, phone numbers, income figures, everything  the same across all documents?  Look at formatting to see if it is consistent in documents from the same source.  For example, does a bank statement look like the actual bank statement from that bank? Check spelling and grammar. Spelling and grammar errors are a sure sign of fraudulent documents.
  3. Call the telephone numbers on the application and documents to make sure they are working numbers.  Then compare the phone numbers on the application with the phone number of the current and previous employers, the ones you find on the employers’ websites or in the phone book.  No website? Be extremely careful.
  4. Verify start and end dates with employers and landlords to make sure they match what’s on the application.  If they don’t, ask your applicant about missing periods of time. The answer had better be good. Check with the current and previous employers to verify income.  Don’t rely on possibly phony paystubs submitted by the applicant.
  5. Look at Facebook and LinkedIn pages and online databases such as opencorporation.com and sba.gov to make sure the applicant’s employer is real.
  6. Check the applicant’s credit report to see if the dates and addresses match up with what’s on the application.  Don’t rely on a credit report an applicant provides; pull the report yourself. 
  7. Do a Social Search to see if the Social Security information is the same as what’s on the rental application.  People using a phony Social Security Number will show up with different names, addresses and dates than those claimed on the application or not show up at all.
  8. Call previous landlords for references. Check to be sure the phone number you are calling actually belongs to the landlord or manager and not a friend posing as a property owner.  One suggestion I saw recommends calling the numbers of previous landlords and asking if they have a two-bedroom unit for rent.  If they answer that you have the wrong number, that waves a huge, spotlighted red flag. Check county tax records online to see if the name of the property owner is the same as the landlord’s listed on the rental application.
  9. If you still haven’t rejected an applicant after finding inconsistencies, ask the applicant to provide hard copies of the documents or to print out the documents in your office.
  10. Spend the time to do a proper screening job.  The Snappt.com survey reports that property managers spend between four and ten hours on each application. Whatever time spent will be worth it if you find a fraudulent application and spare yourself a bad tenant and an eviction.

You don’t have to check every application if you screen in the order the application is received.  The first acceptable one, the one that meets your strict rental standards and passes muster can be the one you accept. Just be sure to make your rental standards are so meticulous that anyone who meets them will be an acceptable tenant.

Bad tenants, tenants who have a spotty or horrible rental history, are not going to start being good little boys and girls.  They’ll keep up their tricks as long as the tricks work and will learn new ones when the old ones wear out.  They’ve worn out their welcomes everywhere they’ve lived.  Don’t let them add your property to the list.

Written for Zip Reports where they provide applicant screening services.

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Who Will Pay the Rent Next Month?

By Robert L. Cain, Copyright 2024, Cain Publications, Inc.

Who won’t be paying the rent next month? Half of US tenants can’t afford to pay their rent, CNN reported on January 24. Not surprising since the median rents have increased 30.5 percent since 2019, up $309, according to Zillow.  Even though eviction filings have increased 50 percent from their pre-pandemic rates most tenants will get their rent paid.  In some cities eviction rates have climbed even higher.

The Joint Center for Housing Studies at Harvard University reports renters’ incomes rose just two percent during that same period. That affects households earning less than $30,000 a year more than any other income group; they account for almost 32 million households, 25.28 percent, or about one in four of the population according to Statista.com. Their “all-time low median residual income of just $310 per month in 2022,” represents a drop of 47 percent from 2001 after adjusting for inflation. But that’s misleading. The actual situation when we add in credit card, car, and student loan payments finds people underwater. More about that in a minute.

Most tenants do find a way to pay the rent even though they don’t have the actual cash in the bank. They use their credit cards and/or do without some things. The first option, credit cards, has resulted in a record $1.129 trillion in credit card debt, reports Lending Tree, $273 billion higher than the fourth quarter of 2021with the average of 21.5 percent interest up from 11.8 percent in Feb. 2014, just 10 years ago. That can only work for so long until the credit cards are cut off  for nonpayment or because they are maxxed out.  Many of them have already met that fate, the average credit card bill of $430 either goes unpaid or some other bill goes wanting.  As of Feb. 5, 2.98 percent of people were at least 30 days delinquent on credit card debt.

And that’s just credit cards. Car payments data are worse. Fitch as cited by Forbes Advisor Oct. 25, 2023 reports that car payments at least 60 days delinquent make of 6.11 percent of subprime borrowers, those people with FICO scores below 660 and often earning less than $30,000 a year. As we would expect, lower-income people show the worst delinquency rates. They start out with the double whammy of having to pay up to 21.35 percent interest to not having the money to make the payments on that loan. The average car payment for a used car is $530 a month.

Add to that student loans. US News on Dec. 15, 2023 reported that the average student loan payment ranges between $200 and $299 a month. That may have been the deciding factor for many people putting them in a position where they have to choose who gets paid and who has to wait.

For example, someone earning $30,000 a year makes $2500 a month gross, not factoring in tax and FICA deductions. With a student loan, credit card payment, and car payment, they start every month $496 in the hole. They haven’t paid the rent and don’t have the money to. And food? They have to use a credit card for that. Their credit cards may be delinquent, their car payment may be 60 days delinquent, and their student loan may have no hope of being paid, and they still don’t have the money to pay the rent. It gets only slightly better for people earning $40,000 a year or $3333 a month. They will have $37.00 left over if they all their bills. Not near enough to pay the rent much less buy food.

Even households earning $50,000 a year, or $4167  a month, have only $1241 left over for food with rent average rents in the US far more than that. The Rent Report from Rent.com found that the median rent on Dec. 7, 2023 was $1967, more than any tenant earning up to $50,000 a year would be able to pay after making student loan, credit card, and car payments.

“Think about a consumer that makes $50,000 a year,” John Green of Discover cards said last December at an investor conference. “When inflation outpaces your wage growth, they’re making choices in terms of what they’re going to spend, what bill they’re going to pay and what they’re going to frankly put on the table.”

Not everyone has student loans or car payments of the median amounts or even at all. Those figures are middle case, not worst case because they are medians, which means half the people’s payments are more and half less. The problem persists, though. Budging room is small to nonexistent for households earning $30,000 or less per year. They will have to decide what bills to pay and what bills to “put on the table.”

Many renters have put the rent bill “on the table,” hoping their landlords will let it slide this month and maybe next month, too, before they find the eviction notice nailed to their door. Not every landlord lets the rent slide but insists on prompt and complete rent payments every month. In this rental market with the current shortage of housing, losing a tenant for nonpayment of rent is no big deal for a rental owner. Finding another one far more qualified is easy.

While evictions in this rental market are no immediate problem for rental owners. The problem persists with houseless tenants who either have to move in with someone else such as parents, family, or friends, or are out on the street unable to find any place that will take them in.

Even if they do find somewhere to stay, their bills, as much or little as they may be, keep coming. If they don’t make their car payments, they will lose their cars and may not be able to get to work. Thus they’ll be out of a home and out of a job, unable to pay any bills.

Rental owners find themselves better off income-wise than they have been for several years with the end of the pandemic-created eviction moratoriums and their having to eat their mortgage and insurance payments because of lack of rent. But you can’t do just one thing. Every action has consequences, many unpredictable. What we can predict with some certainty are government plans for rent control and for preventing rental owners and managers from considering tenant histories and incomes in tenant selection. Some of those are already in the works in cities and states.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

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Two Easy Application Verification Tricks

by Robert L. Cain, Copyright 2024, Cain Publications, Inc.

They seem like nice people, and they may be. Appropriately well-dressed with children who are both respectful and behaved, they might just be great tenants. But we can’t take appearances and first impressions carefully crafted as evidence of how they’ll be as tenants.

The first and absolute rule of tenant selection is verify everything. Nice people who will be good tenants will have no trouble qualifying with these two verification techniques.  They are both simple and quick.

First is the driver’s license trick. Of course, you always ask for picture ID from every adult applicant. Usually that is a driver’s license and that can tell a couple of things that many bad tenants might never think of. Bad tenants count on landlords who are in a hurry and accepting of a sob story. When they filled out their rental application you asked for their current address and landlord and three or four previous addresses and landlords. Now you ask to see their driver’s licenses. Absent that, they may show you a passport. We’ll look at how to deal with that in a minute. If you are able to, make a copy of the front and back of the driver’s license. You make  copy of the back because some states (you know if yours does) put a change of address sticker on the back.

If they say they don’t have a driver’s license, ask how they got themselves to see your property.

Now check the rental application to make sure it’s completely filled out. Remember, you are in charge. It’s up to you to decide when an application is acceptable, not them. If it fails the completeness test, hand it back to your applicant and ask for the missing information. “I don’t remember” won’t work as a valid excuse for a blank space or incomplete information. Tell them to take it home with them, find out the information, and bring it back to you. No exceptions.

Satisfied you have a completed application, get the driver’s license out again and look at their address. Now compare that with the current address they listed on their application. Do they match? If not, does the address on the driver’s license match the previous address, the one on their application? Maybe it matches or another address comes after it or before it. No, people don’t run right down to the DMV to get their address changed on their license even though the law says they’re supposed to. Nobody likes to deal with or has time to deal with the DMV, so they just leave it until renewal time. But you have information you can use to verify information on their application.

Second is the verification trick and where the fun begins. Get on your computer and look up county tax records. Depending on the state and county, that information will be in a different place but usually with the recorder’s office. It doesn’t matter if they just moved from another state. Chances are you can get the information online from whatever state they say they moved from. This step is essential, though, and if you can’t get the information, you can reject them because you were unable to verify.

The application listed the names of current and previous landlords and their phone numbers. Check to see if the listed property owner is the same one listed on the application. Not acceptable as the name of a previous landlord are first names only. Debbie and Sam are not the owners (because they can’t remember the last names of those landlords). You need last names. But you should have spotted that when you looked over the application for completion. I know, if their landlord was a management company, it will be different. Even so, that’s information you can use.

What if the property owner’s name is different from the name your applicant listed as the landlord? Again, it could be a property manager, but that’s something easy to verify. Keep checking previous addresses and landlords. Are they all suspicious appearing as in different from the names on the application? Huge red flag. Cross check the phone number of the previous landlords with the ones they listed on the application. You can do that online, too. Yes, you might have to pay a dollar or so for each check or pay by the month, but that’s why you charge an application fee. Do the phone numbers match the property owner’s name on the application? Are they even close? Then go the other direction and see who the phone number belongs to. If it’s  a cell phone, you won’t get a listing, but you probably will with a landline. If the numbers don’t match, more fun begins if you want to go that far. But the numbers not matching is grounds to reject the applicant out of hand.

Call the phone of the registered property owner, the one you found with the county tax records, and ask if they had been the landlord for your applicant. Assuming they had been, would they rent to them again? Now listen. What you hear could be telling or it could just confirm that they are the nice people that they appeared to be. If the number belongs to a management company or property manager, they will answer with the company name, not just “hello.”  “Hello” or “yeah” could mean they have a friend pretending to be the landlord.

Assuming the rest of the application checks out such as for their employer, whom you’ve also called to verify, you can call your applicants to ask about the discrepancy. At that point, you could have rejected them automatically, but sometimes it’s informative to hear a good story, isn’t it?

What if they showed you a passport but didn’t have a driver’s license and their story about how they got to see the property seems reasonable. You’ll have to skip the addresses on the driver’s license and go directly to verifying landlords with county tax records. It works the same but starts with step two.

Most of the time nice people or those acting like nice people are and will be good tenants, but the times you find them out by discovering their deceptions make it worth every minute you spend on the verification process. With the current shortage of rental properties, we can afford to require that our applicants meet all our criteria, not theirs, and have been completely and verifiably truthful.

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Job Scams Result in Monetary Losses and Criminal Charges

By Robert L. Cain, Copyright 2024, Cain publications, Inc.

Law-abiding citizens don’t expect the police to come knocking on their doors with search warrants and raid their houses. But what if, unbeknownst to them, they aren’t law-abiding? That’s what happened to Adrian Hart of Toledo, Ohio.

Adrian had applied for a “work from home” job and got hired by a company called Ovebone to reship packages. “I had to go to Best Buy and pick up like a drone,” she said, “take pictures of it, take pictures of the back of it, the shipping labels, and I shipped the product out,” reported Toledo TV News station WTVG.  Then one day, the police came knocking and told her she was under arrest for receiving stolen goods. She got out of jail the same day, but she’s still facing felony charges.

Applying for and accepting what seems like a legitimate job shouldn’t put you in jail, and usually it doesn’t. Reshipping jobs, though, are one of the “job scams” that can land an unaware job-seeker in legal trouble. With other work-from-home jobs such as multi-level marketing jobs, supposed government jobs, envelope stuffing, data entry, and mystery shopper jobs just they steal money from the job seekers. Too often these “jobs” end up costing the job seeker thousands of dollars because they involve worthless checks which the job-seeker is told to cash and send the “overpayment” back to the “employer” or buy equipment to do the job he or she was hired for from a company owned by the supposed employer. The check from the employer, of course, is no good and the job seeker is out money sent back to the employer and/or used to buy the equipment, such as a “required” new computer system, for the job.

Despicable as those fraudsters are who take advantage of people looking for work and steal their money, they can’t hold a candle in sleaziness to the fraudsters who expect new employees to engage in, unbeknownst to them, illegal activities.

Here’s how the reshipping scam works. Criminals buy high-value products with stolen credit cards and recruit unsuspecting job seekers they call ‘”mules” to receive and forward those stolen items to other criminals who then sell them on the black market for cash. Those criminals, are usually in countries where they are untouchable by the US legal system, but the new job seekers are in the US and can be prosecuted for accepting stolen goods, conspiracy, theft, or more charges a creative district attorney can dream up.

The sophisticated system has pre-printed and prepaid shipping labels to take to the post office. The mule packs up the high-priced computer, iPad, or other electronic device and sends it off using the provided shipping label.  The crook receiving the goods then resells them. The mule, or new employee, promised a paycheck at the end of the month knows he or she has been scammed when no check shows up and the company that hired him or her is nowhere to be found. Thus, they are out the time they spent packing and sending the stolen goods and may face arrest for illegal activity.

The same system applies to the reselling scam. An unsuspecting job seeker gets a call from a stranger offering a job opportunity, or he or she may see an ad online or in the newspaper saying they can make money buying name-brand luxury products for less than retail and reselling them at a profit. Incredulously, they fall for it, order and pay for the products. But the order doesn’t arrive, or if even it does, it’s junk and not the high-end product the ad promised. Likely whatever does arrive was purchased with a stolen credit card and the reselling victim receives stolen goods.

Some people do catch on before the scam affects them. Nineteen-year-old Cameron Boyd, for example, wanted that customer service job he found online that paid $25 an hour. He interviewed on Google Hangouts during which they asked him for his mailing address so they could send him a check to pay for the work materials the job required. He was to purchase the materials through the employer’s “preferred supplier.” The $2,250 check came a few days later by FedEx from a landscaping company he had never heard of. The hiring manager told him to deposit the check immediately at a bank ATM and under no circumstances by using a mobile deposit or a bank teller. His suspicion aroused, Boyd took the check to the bank anyway. The teller took one look at it, and told him the check was bogus, the whole thing a scam. Fortunately, Cameron Boyd’s good sense and suspicion saved him money and grief.

Job scams of all kinds continue to grow and victimize people looking for work either full-time or for gig work reports the Better Business Bureau. Sometimes they include identity theft because the purported employer gets the applicants to provide their Social Security Numbers and bank account information for the “direct deposit” of their paychecks. That’s all the crooks need to steal someone’s identity.

People do fall for it. More than 45 percent of the victims are in the 18 to 34 year old range, Gen Z’s and Millennials, reports the Better Business Bureau. An additional nearly 21 percent are in the 35 to 44 year old range, but we have to suspect that mostly involves the under 40 year olds. Why those age ranges?

Those are the people who may have little or no critical thinking ability and have little suspicion about what they find online. As people get older and life bites them along with people they know, they become more suspicious and respond with “I don’t think so” to shady offers.

Our own experience tells us that you don’t have to pay money to a company to get a job. The company offering a job should have a website, verifiable address, and phone. When you call the verified phone number on the company’s website, they should be able to confirm the job offer is real. Any email address should be a company email address and not a Gmail or Yahoo address. Personal information should never be provided to anyone who cannot be verified or for online applications. Most important, never pay a stranger for a job.

Poor Adrian Hart goes to court February 13th and hopes the prosecutor will see reason and understand that she was the victim and had no intention of breaking any laws. Best of luck, Adrian.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

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How Employee Theft Affects Business Profits

By Robert L. Cain,Copyright 2024, Cain Publications, Inc.

The owner of ABC Technology (not its real name) was surfing EBay looking for used equipment and found two new computers for sale across town that matched two she had seen delivered from a customer’s order the day before. Curiosity piqued, she discovered more than $300,000 in equipment sold on EBay by two of her employees. Far from alone, ABC’s owner was part of the two-thirds of small businesses victimized by employee theft, reports the National Federation of Independent Business. Businesses of fewer than 250 employees are considered small businesses. But they represent 51.7 percent of total business revenue in the US.

Employee theft ranges from simple buddy-punching and taking home office supplies to stealing company information and money. Smaller potatoes, time theft and buddy-punching, represents amounts unlikely to do financial damage to a company.

Companies lose around 5 percent of their net revenue to employee fraud and “occupational abuse,” around $4.5 trillion a year annually worldwide. The big losses come from schemes of financial employees. They can bankrupt a small business. The Association of Certified Fraud Examiners reports that about 21 percent (on in five) of employee fraud cases they analyzed in 2020 each caused financial losses of more than $1 million.

Unsurprisingly, 40 percent of embezzlements, the most costly, came from the finance and accounting employees or sectors, reports Hiscox, Inc.  How they pull off the financial fraud varies and depends largely on how well irregularity spotting of the accounting system of the company is set up. Small businesses bear the brunt because they don’t usually have the accounting safeguards built in that huge corporations have. Small businesses may also take most of the hits because of company culture. Often they are “close-knit,” like “family” with trusted employees, empowered with responsibilities with little or no oversight for running the company, explains the Association of Certified Fraud Examiners. Hiscox, Inc. reports that 80 percent of all organizations falling victim to embezzlement had fewer than 100 employees with just under half having fewer than 25 employees.

Those employees, explains the Association of Certified Fraud Examiners, “tend to be smart and liked.”  They start out taking a one-time loan, intending to pay it back just as soon as their current financial predicament gets resolved. Then they come back for more while rationalizing that they are underpaid or feeling as if there’s no other way to provide for their families. The thefts will keep up until their employers catch them, typically 14 months. They are spotted because 42 percent of fraudsters get caught because they were living beyond their means and 26 percent had been experiencing financial problems.

Some embezzlers get caught because the employer notices that the books seem to be disorganized or confusing. They could be faking vendor payments or padding expense reports, for example.

Fake vendor payments are where an employee makes up fake invoices for never-sold goods or services. They pocket the money in the amount of the invoice they faked. Padded expenses arise when, for example, an employee pays for another person’s meal with a company card in exchange for cash from the person whose lunch they bought. Then they ask the company for reimbursement for the expense and keep the cash their lunch partner paid them.

Accounts payable fraud, something more difficult to detect, can be a “pay and return scheme” where an employee overpays a vendor and asks for a refund from the vendor. The employee keeps the refund.

With personal purchase schemes, an employee creates purchase orders and payments for goods for their personal use, keeping the goods, returning them for cash, or selling them, like the computers and the ABC Company. How that escapes notice by an employer escapes me.

Accounts receivable fraud comes in a variety of permutations with “billing errors,” and delays posting customer payments, though either could be legitimate, and that’s why it’s hard to carch.

Vendor fraud can entail bribery and kickbacks to the employee so a vendor can do business with the company. Difficult to spot, they never appear on the company books. Kickback or bribery fraud can come from selecting only one vendor, payment of unreasonably high prices to that vendor, excessive quantities of goods benefiting the vendor, accepting low-quality goods at higher prices, and delivery of items that don’t meet company specifications  and getting kickbacks from the vendor. One-off events may only be suspicious, but continued business with a vendor meeting the criteria above can be cause for suspicion.

That kind of fraud is difficult to spot and even more difficult to prove. Only 16 percent of companies that are ripped off ever call the police.

So what happened with the computers stolen from the ABC Company? The guilty parties, the techs, had submitted purchase orders for the customer’s equipment and the company techs had ordered and installed the equipment without ever checking them against the customers’ purchase orders. Add to that another level of fraud. The head technician discovered the bookkeeper had been engaging in minor receivable theft. He blackmailed her to cooperate in the larger, computer-theft scheme. The bookkeeper got charged and settled for restitution in exchange for not going to jail.

Why are so few fraudsters prosecuted? Most often the business owner wants to recover the stolen money rather than seek “justice.”  They may file charges against the perpetrator but negotiate dropping the charges if the embezzler reimburses the company, often signing a non-disclosure agreement in addition to reimbursement.

Unless he or she is prosecuted, which leaves a legal trail, the employer dares not say to a future employer that the individual had been fired for stealing lest the company face a defamation suit. As a result, thieves keep on getting hired by new companies and keep on stealing from their new employers without any suspicion that that employee had been fired for theft.

With thefts often coming from the person you would least suspect, the most well-liked, longest employed, most trusted people, business owners must be vigilant and constantly check the books, the inventory, and the personnel, just to see how the business is doing if nothing else. Running a business is a hands-on job, not a trust everyone project.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

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Dark Patterns Scam Internet Users

By Robert L. Cain, Copyright 2023, Cain Publications, Inc.

Crime does pay. Credit Karma made millions with their scam for which the Federal Trade Commission fined them $3 million, lunch money to Credit Karma. They garnered 2500 data points from each unsuspecting consumer who answered their ad that claimed they were pre-approved for a credit card. Those data points will provide a never-ending supply of targets for their and other companies’ advertising when they sell the information.

Credit Karma, owned by Intuit, the company that sells Turbo Tax and QuickBooks, ran ads that claimed readers were pre-approved for a credit card, and all they had to do was fill out the form. Then, one-third of these unwary souls got turned down for credit, wasting their time and putting a hit on their credit report because of “hard inquiries.”  Every time a company checks a consumer for credit, it dings his or her credit report, lowering the credit score, further damaging someone’s already poor credit, making it even more difficult to get any kind of credit.

That’s just one example of what are called “dark patterns,” but can be more familiarly known as “sleaziness” at best and “illegal” at worst. Coming in several forms, wired.com explains it as “ploys to trick you into spending money, or make it nearly impossible to unsubscribe.”  The term dark patterns used first by User Experience (UX) specialist Harry Brignull, explains how software can trick a user into doing things they had no intention of doing when they used the software or “discouraging behavior that’s bad for the company,” wrote wired.com.

Some of the more common forms of deception involve ads disguised as content. You’ve no doubt come across at least one of those. When it happens to me, I immediately click out of the site and never go back, but enough people don’t follow my predilection and actually read the ad.

Another deception, trick subscriptions sneak or misdirect a user to think they are buying one thing, but the website has hidden a legal stipulation that they are signing up for a recurring subscription. Once signed up, the service continues without the user knowing it’s there, having never been sent emails or notifications that they are paying for it, and payments continue until the unaware user cancels, but good luck canceling. The website that charged their credit card makes it difficult to cancel. More about that below.

One example of the trick subscription comes from the design tool Figma, owned by Adobe. Designed to allow work sharing, if the user selects “can edit” rather than “can view,” Figma creates a new monthly subscription for the person to whom the document is sent paid for by the user who sent it. Unbeknownst to that user, his or her  credit card gets charged for the subscription. Nowhere does Figma mention that charge. Of course, complaints to social media result, but apparently Figma doesn’t care a whit. Yes, it is illegal under ROSCA 4,15 USC §8401 and §8403, but so far Figma and Adobe have escaped prosecution.

Another example, lawdepot.com charged one customer in England £83.88 after clicking for the offered seven-day trial. Lawdepot moved the “free trial” offer to the “Prepaid for One Year” option. Sleazy, of course, illegal, probably, again under ROSCA 4,15 USC §8401 and §8403

Movehub.com lies “about the prices they quote you and yes there are Hidden Fees. I spent $5000 [in] extra in hidden fees,” wrote David Dobrinskiy after he had been bamboozled by movehub’s website. A GG wrote, “Deceiving forms and landing page. They should say right away that no quotation will be given on the spot, instead of collecting quite a bit of personal and non-relevant to the offer data.” That’s similar to Credit Karma’s shtick where they collect information they can sell to advertisers.

Have you ever tried to unsubscribe to something your ordered on line? When you try to unsubscribe to SamCart, good luck. Will Phillips complained that SamCart “forces you to watch a video to cancel” and then adds an additional confirmation step after that. That’s an easier one than the sites that bury the unsubscribe option at the bottom of the page in tiny print often of a color similar to the background.  Companies count on people delaying or even giving up trying to unsubscribe. Explains Harry Brignull, “They are going to get around to it eventually, but if they might stay for an extra 10 percent of the time, or 20 percent, the accounts might live just a little bit longer. And if you’re doing that en masse for hundreds of thousands of people, that translates to enormous amounts of money, for people who are going to leave anyway.”

Trick wording misleads a user into taking an action by using confusing or misleading language. For example, from 2010 to 2013, Ryanair used deceptive wording dark pattern. During the flight booking process, Ryanair said,  “Please select a country of residence” written prominently on a dropdown menu. Reading that on its own, users were likely to just select their country of residence from the dropdown and continue with their booking process, unwarily purchasing travel insurance.

For a user to choose not to purchase travel insurance, they were required to open the dropdown and scroll down to the label “No travel insurance required,” nonsensically listed between two countries: Latvia and Lithuania. Ryanair combined trick wording with the visual interference deceptive pattern to confuse and misdirect users.

Fake reviews have already come to the attention of the Federal Trade Commission. It wrote on its website, “The rise of social media has blurred the line between authentic content and advertising, leading to an explosion in deceptive endorsements across the marketplace. Fake online reviews and other deceptive endorsements often tout products throughout the online world.” The FTC is now using its Penalty Offense Authority to “remind advertisers of the law and deter them from breaking it.” Even so, fake reviews litter the online world. The Better Business Bureau lists several ways to spot a fake review such as misspellings, grammar errors, and identical wording across reviews, all of which I know I have seen as have you, I am sure.

Companies’ priorities differ from a goal of serving the best interests of the people using their app or website. When they create an app or website, they do it to make money, and apparently making money involves using dark patterns and not serving their users ethically or legally.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

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For Want of  A Screw

By Robert L. Cain, Copyright 2023, Cain Publications, Inc.

Several years ago a lawyer called me who was representing a property owner who had been sued by someone who got injured on the owner’s property.  The owner hadn’t done much maintenance, preventive or corrective, and the injury resulting from that lack of maintenance brought about the lawsuit. In what seemed to me like a desperate attempt to stave off a judgment, the lawyer ordered a book I sold at the time, Preventive Maintenance for Apartment Communities. The book consisted of a list of what maintenance to do when.  Follow that and do the repairs that the inspection reveals, and you have done preventive maintenance, and liability for inadequate repairs disappears. But only sometimes.

Ordering the book likely was the attorney’s effort to show that the property owner had reformed his negligent ways and now took more responsible care of his property. How buying a book after the fact showed lack of negligence passed me by, but I gladly took the order.

It takes very little for a property owner to end up on the paying end of a lawsuit. For want of even a screw, a property investment could be lost.

The damage and lawsuit resulting from a lack of such a little thing as a missing screw can and will bankrupt a property owner.  It falls under the “Constructive Knowledge” principle.  That’s  a legal terms for what a person who applies reasonable care should have known.  For example, suppose on the front door of an apartment building of a door lock was missing a screw so it didn’t properly lock the door. An owner should have known and would be liable for crimes and injuries to tenants resulting from the broken lock. Lawinsider.com explains, “constructive knowledge may be established by circumstantial evidence showing that: (1) ‘the dangerous condition existed for such a length of time that in the exercise of ordinary care, the premises owner should have known of the condition’; or (2) ‘the condition occurred with regularity and was therefore foreseeable.’”

Witness the case in Chicago where 1235 North Shore, LLC and Rick Olsen ended up paying $800,000 because a tenant was sexually assaulted after the assailant accessed the building by walking through three exterior and interior doors after going through a sidewalk metal gate missing a lock. The owner should have known.

Bad guys look for easy marks to do whatever criminal activities they plan to engage in. They try doors and gates to test for broken, unlocked windows, doors without locks, or other easy ways of access so they can come back at a time more convenient to do their dirty work.

How can owners protect themselves?  They make a plan and carry it out.  Many owners, both residential and commercial, don’t deal with repair issues until something breaks and someone complains, relying on complaints for notice that something doesn’t work as it’s supposed to. How much cheaper and better PR it is to do maintenance checks at least every three months and make repairs before the lack of repairs results in problems.

That kind of maintenance has the advantage of preserving the physical integrity of a building, saving money in the long run. Mostly it involves walking around and through the property using a checklist to discover potential problems before they become expensive. The result of preventive maintenance is corrective maintenance.

Corrective maintenance is nothing more than fixing things that are broken or otherwise require attention. Repairing leaky faucets, broken windows, wonky HVAC, and balky locks fall under this category, those same calls you get from tenants saying something needs fixing.

Routine maintenance is the scheduled stuff. (The definitions for it and Preventive Maintenance can be reversed.) Cleaning the gutters once or twice a year, picking up litter in common areas, lawn mowing, parking lot striping, and fence painting all fall under routine maintenance. Most important to survey are items that could be safety and security issues such as broken or non –existent door and gate locks and unlockable, unlocked windows, loose handrails, and broken steps. It cuts down on corrective maintenance costs. But it can be a major budget item, especially if regular maintenance has been ignored until it costs considerably more than replacing a 50-cent screw. In a commercial building, for example, routine maintenance can swallow up 18 percent of the budget, but residential properties may not get the same daily use by numerous people that commercial buildings do.

Why don’t property owners do preventive maintenance and routine maintenance?  The excuses are often such as “I don’t have time,” “It costs too much,” “I just never think about it,” or maybe “that’s what my manager’s supposed to do.” Then why didn’t your manager do it? Vital to remember is that property owners bear responsibility for the acts of their agents and employees. If that agent or employee fails to maintain the property, it’s the owner’s responsibility. Owners can’t absolve themselves of responsibility by blaming someone whose work should have been checked.

Preventive maintenance means spending a little now to save more later.  It has the additional advantages of first, showing tenants you are on the ball, and second, giving you the opportunity to inspect your properties for not just repair issues but tenant issues.  It’s interesting what you see when you notice how and what your tenants are doing, isn’t it? Best of all, it maintains and improves the value of your investment.

Just as important for any work done on a property: document everything, date, time, and work done. Leave nothing to memory. In the event someone sue for an injury on your property, you can provide evidence that you had made any repairs necessary for proper maintenance of your property. No, it won’t always be entirely sufficient proof in a lawsuit, but will contribute to proving lack of culpability.

Take the time, put it on your calendar, and walk around your property with a checklist of things that could require repair.  Wiggle handrails, check the locks, look for leak evidence, both roof and plumbing, and take care of little things before they result in a lost property for want of a screw.

For Want of a Nail

For want of a nail, the shoe was lost.
For want of a shoe, the horse was lost.
For want of a horse, the rider was lost.
For want of a rider, the message was lost.
For want of a message, the battle was lost.
For want of a battle, the kingdom was lost.
And all for the want of a horseshoe nail.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

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Check Fraud: Old Scams with New Twists

By Robert L. Cain, Copyright 2023, Cain Publications, Inc.

Eric Fischgrund runs Fisch Tank PR, a PR firm employing 30 people. Clients mailed 15 checks to him that a crook or crooks stole after they had gone through a Postal Service distribution center. The bad guys cashed 10 of them, reported a June 13, 2023, Associated Press article.

The checks were stolen in March, but Fischgrund didn’t become aware of the problem until April after several of his always-on-time clients missed payments. After the Postal Service investigated, Fischgrund recovered 70 percent of the revenue, but some cases remain unresolved as of the time the AP article appeared. The crooks had used one of the techniques check fraudsters use to alter the checks so they could be used for purposes other than what they had been written for. More about those techniques in a moment.

Now Fischgrund asks for electronic payments only. “I think we’ll never go back to asking for checks as an option,” he said.

Mr. Fischgrund’s experience is far from unique. Banks reported around 680,000 check frauds in 2022 to the Financial Crimes Enforcement Network (FinCEN). That’s up from 350,000 in 2021. The US Postal Service also reported some 300,000 complaints of mail theft, more than double the previous year, which may or may not be in addition to the FinCEN numbers. But the Federal Reserve reports that fewer people write checks anymore, the number of checks it collected having dropped 82 percent over the last 30 years.

Crooks have found checks to be an easy mark for fraud. No cyber hacking skills required, just old fashioned thievery and chemistry. David Maimon, an associate professor of Criminal Justice at Georgia State University explains in an article in TheConversation.com, crooks steal mail from personal mail boxes or neighborhood collection boxes using keys they have copied, stolen, or paid as much as $1,000 for on the dark web. Then they wash the ink off the payee and dollar amounts often with nail polish remover and post the altered checks on the dark web for sale for an average each of $175 for personal checks and $250 for business checks payable in untraceable bitcoin. They might also use the check themselves adding a different payee and larger payment amount. “Presto,” free money. The likelihood of getting caught, slim to none. Well, slim, anyway. Last year in Southern California, law enforcement arrested 60 people for committing more than $5 million in check fraud against 750 people.  But, that’s a number that’s hardly a blip on the crook radar compared to the number of check frauds every day.

Banks usually make good on the stolen checks, but sometimes it can take considerable time and in the meantime, the account holder is out the stolen money. But the banks end up the biggest losers.  Statista.com reports that in 2022 financial institutions estimate they lost almost $2 billion to check fraud of one variety or another.

Stolen checks also lay the groundwork for Identity Theft, opening up an avenue to steal victims’ identities as checks provide all the information regarding people’s identities needed to steal an identity. Checks have the name and address of the account holder printed on them, and crooks use that to open bank accounts and apply for loans on behalf of the victims.

Mail theft has reached such proportions that the Postal Service advises people to mail checks from the Post Office itself rather than their own mail boxes or the neighborhood collection boxes. But we have to wonder how that relates to Eric Fischgrund’s checks having been stolen from a post office distribution center. In spite of that, the US Postal Service, reported NPR, has withdrawn funding for postal inspectors, the very people tasked with dealing with mail theft.

The Postal Service’s response? “The U.S. Postal Inspection Service takes seriously its role to safeguard America and will continue to aggressively pursue perpetrators that use the U.S. mail system to further their illegal activity.”

Checks stolen from the Postal Service are just one method of check fraud. David DeNicola writing for Experian describes four types of check fraud in addition to the stolen check-altering method.  Some we recognize from the olden days, others provide a new wrinkle for crooks.

What’s called “paper hanging” takes advantage of the “float.”  The check writer pays for a product or service with a bad check. The recipient deposits the check in good faith and discovers several days later that the check bounced. It takes three days or so for a check to clear the bank, and since banks pay on checks immediately, the bad guy disappears before the check bounces.

Another old standby, “check kiting,” involves using multiple bank accounts. Someone writes a check from Bank C where he has sufficient funds, covers the amount he wrote the check for in his account in Bank W where he doesn’t have sufficient funds. That can go on for several iterations before the kiting scheme runs out of money sources.

“Check washing” I just described above.

“Check cooking,” similar to check washing, involves scanning a stolen check and using software such as Photoshop erasing the payee name and amount, adding a new payee and a much larger amount, and then cashing the Photoshopped check.

Another old standby, “check theft and forgery” involves crooks stealing blank checks, maybe from a mailbox, and forging the signature of the legitimate account holder.

With so many ways to be a bad guy, it’s hard to keep up with all the permutations and combinations crooks use to steal money. Always creative and imaginative, they constantly look for new ways to scam the public.

How to protect ourselves?  One obvious method is don’t write checks; rather, use the electronic pay systems available through banks and companies you do business with. Have people send you money through direct deposits to your bank account. That saves a 65-cent First Class Mail stamp and the nickel or so for the envelope, not to mention the time and effort of going to the Post Office to deposit the mail. Sure, crooks hack into the pay systems of companies, but you are protected because once you make a payment, you get a confirmation. Then even if crooks steal all the money, you have proof you paid.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

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Student Loan Payment Resumptions Effect on Borrowers and Businesses Show Danger Ahead

By Robert L. Cain, Copyright 2023 Cain Publications, Inc.

Economists predict that the end of the student loan repayment moratorium will have little to no effect on the overall economy. They are probably right. That misses considering the ill effects on individual student-loan borrowers. Adding back a student loan payment on top of other household bills such as credit cards and car loans for millions of borrowers can’t help but affect individual people’s situations.

Doing their best to survive inflation in the face of higher rents and interest rates on credit cards, now many people may have to decide what not to buy and maybe who not to pay that month. Mark Zandi, chief economist at Moody’s Analytics, estimates the average monthly student loan payment at $250, pulling  $5 billion out of the economy every month. Other economists calculate it much higher. Deutsche Bank, for example, says monthly payments will average $305 and yank $14 billion  monthly out of the economy. Who is right? It doesn’t matter. Take billions in spending power away and somebody or something gets less money.

Both the Moody’s or Deutsche Bank prediction drags down consumer spending especially among specific demographics. Millennials and Generations Y and Z, who carry most of the student-loan debt, will have to reallocate an average of 6.5 percent of their incomes to repay their student loans estimates a Collage Group survey of 4,149 people planning on cutting their spending.

Exacerbating potential problems are credit cards with credit-card 30-59 day delinquencies increasing to 8.9 percent in August, according to VantageScore. Many Gen Z and Gen Y consumers  already must rely on credit cards for daily living. MacKinnon says, “When we looked at generational approaches to financial downturns, we found that younger Americans — those more likely to be impacted by student loans — are more likely to buy less apparel, beauty and skin care products and alcohol. They also plan to shift to cheaper brands for groceries and home care like cleaning and laundry.” 

That adjustment would have a minimal effect on businesses that sell groceries and home care products. Retailers who rely on younger consumers for a larger percentage of their business are more at risk. Macy’s, American Eagle Outfitters, Gap, citing a decline in their sales this year, warn that middle and lower-income consumers, who represent a significant percentage of their business, could suck some of the $10 billion monthly out of those companies’ bottom lines if they spend money on student loans instead of with them reports Gariela Barko in July 12, 2023 article in modernretail.co. I know, that doesn’t come even close to the figures from Moody’s and Deutsche Bank, but that’s what those companies claim.

They will probably survive, except maybe Macy’s, already reporting an $84 million business decline year over year, exacerbated even more by a hefty increase in their in-store credit-card delinquencies. All that is unrelated to student loan repayment issues. Losing the business that younger consumers provide could be the proverbial straw on the camel’s back and push them into bankruptcy.

Less able to withstand losing significant business are some small and startup businesses who rely on younger consumers. Serena Rathi, founder of the Indian pantry company Droosh, warns in the modenretail.co article that the return of student loan payments might negatively affect her company’s growth as startups already have to deal with high customer acquisition costs and production costs. She says “This poses a challenge for food brands like Droosh, as we rely on consumer spending. We are adopting new strategies to cater to changing consumer priorities and tighter budgets.”

Especially hard hit will be business that rely on discretionary spending such as restaurants, fast food businesses, and bars. If people stop spending five dollars a day for a cup of coffee at their neighborhood coffee shop, or $25 a week, it provides $100 extra a month that could pay for 40 percent of that average student loan bill of $250. But if 50 percent of their customers did that, it would measurably hurt that store’s income. If half their customers forgo Papa John’s Pizza once a week, in a month saving maybe $80 for themselves, Papa John’s will notice. If they don’t go to Target to buy things they don’t really need, and save who knows how much, Target would survive but earn a lower profit. Stay home on Friday night rather than go to a neighborhood bar and spend $100 on drinks, and save $400 for the month, and the local bar takes a big hit if too many of their customers show such thrift. Should it become a general rule rather than only with the more thrifty, restaurants, McDonalds, Starbucks, and neighborhood bars lose money some enough to force them to shut their doors sending employees into unemployment. Major companies can survive, but small restaurants, mom and pops, neighborhood stores, and local bars face financial peril.

Car loans face even more trouble. The average monthly payment for all borrowers for a new car loan is $725 and $586 for a used car loan. That’s the average for all borrowers. Lower credit scores ramp payments even higher. For example, for borrowers with a FICO score of 600 to 660, a new car payment averages $765 and a used car payment $529, $40 and $13 respectively higher than the overall average, and $35 and $27 respectively higher monthly than for a borrower with a 781 to 850 credit score. What might those folks do when their student loan payments make their car payments unaffordable?

Sixty-plus day delinquent car loan delinquencies stand at almost 7 percent for non-prime borrowers, 300-660 FICO, reports Equifax. Compare that to 4.89 percent a year earlier. Add student-loan repayment to their debt load and the cautionary prospect grows.

Not everyone will be so diligent that they cut way back on discretionary spending. Those of the less diligent group will have to decide who doesn’t get paid that month. The effects ripple out like when a stone drops into the water. If their car is repossessed and they can’t get to work, if their landlord evicts for nonpayment of rent, the ill effects ripple farther and father and unpredictably.

We can only surmise the eventual outcomes for individual student-loan borrowers, for auto finance companies, for rental owners, and for small businesses. In a situation where many people cut back to pay for their student loans, the effects on individuals, landlords, and businesses pose foreseeable problems.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

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Who Gets Laid Off and Why

By Robert L. Cain, Copyright 2023, Cain Publications, Inc.

Why do companies lay people off and who gets the axe when they do?  Knowing that can help determine the better or most qualified applicant.

Companies lay off employees for any number of reasons, but most often it has to do with the cost of employees. Company officials may word it different ways, but layoffs boil down employees costing more than the business is willing to or even able to pay.

We’ll look at the warning signs of imminent layoffs and then what criteria companies use to pick the candidates for layoff.

US News in a February 24, 2023, an article cited a study by LinkedIn and Business Insider of situations that augur layoffs for a company.  

One sign, employees who leave don’t get replaced. Using attrition to cut wages is the easiest and least upsetting for a business and its employees. But if attrition doesn’t do the trick, layoffs could follow.

Second, hiring and spending freezes aim to reduce costs through “belt tightening.” That doesn’t necessarily mean layoffs are coming but merits paying attention to. It might only mean that company officials have looked at the books and just decided they are spending too much for salaries.

Third, and more likely to mean imminent layoffs, budgets shrink and new projects get cancelled. More “belt tightening” could be afoot, with belt tightening requiring layoffs.

Fourth, a merger or acquisition is coming. That often means “surplus” people. Mergers and acquisitions mean the merged companies can have redundant employees, two or more people doing the same job. How they decide who goes in a minute.

Fifth, company executives leave. They find out first about cutbacks in the works, what regular employees may not be privy to.

Sixth, the company already has been laying off employees. If those aren’t enough to bring the company back into the black, more layoffs follow.

Seventh, a company restructures. That might have nothing to do with company health but could entail rethinking job descriptions and pay scales. Not surprisingly, one of the first things in a restructure is determining if they can do without some of the people being restructured .

Eighth, research and development gets cut. Not a promising sign for any business.

Ninth, for some time the company hasn’t been doing as well as it had been revenue-wise. Shoring up profits often means layoffs.

Tenth, to save money, the company farms our work to contractors or other companies. They might also hire consultants to figure out what has been adversely affecting the company’s bottom line. Salaries often come in at the top of the adverse effects list.

Eleventh, a WARN Act notice, something required of every company with more than 100 employees, goes out coming 60 days before actual layoffs begin, a sign layoffs likely are on the horizon.

Twelfth, technological advances, such as increased automation and use of artificial intelligence could mean layoffs. That should come as no surprise to employees if they see new software and machinery installed to do the work they had been doing.

Thirteenth, a company might decide to move overseas or to Mexico, to a country with lower wages.

Almost all these situations are news to be reported in business journals.

Once layoffs begin, assuming the company plans to stay in business and in the country, which employees go first?

The year of the worker, 2021, two years past, and the perks and benefits companies enticed workers with have been thought better of and disappeared with the new year 2022.  Massive layoffs in the tech industry starting or continuing with Netflix, Google, Microsoft, Meta, Zoom, and Amazon are one sign companies are rethinking what they spent to attract employees. Layoff.fyi reports that as of July 20, for example, 201,860 tech employees have lost their jobs. How did those companies and others who began laying off decide who had to go?

Recent hires come at the top of the list, reported businessinsider.com about an analysis by Revelio Labs. Most layoffs affected employees who had worked for the companies an average of 1.2 years. In the Year of the Employee, amid the Great Resignation, in order to attract top employees, companies had to offer so much in wages and benefits that it created an unacceptable pay gap between people recently hired and longtime employees. The pay gap of new hires over existing employees, the analysis found, amounted to seven percent. In some tech companies, the gap could be as large as 20 percent. When the economy and the competition for employees settled down, those recent hires with outsized paychecks were first to go.

Even if they hadn’t been part of that hiring frenzy, other high earners could find themselves with pink slips. Businessinsider.com reported that the average laid-off engineer for example made $86,000 a year while the going rate for engineers was $75,000. Other administrative, sales, and marketing people earning $10,000 more than their counterparts also got shown the door.

Millennials in general found themselves disproportionately at the top of the layoff list. They had been most likely to find new, higher-paying companies to work for during the Great Resignation. They decided that the pay they had been receiving since the 2008 recession made it not worth staying where they were, and they signed on to higher-paying jobs paying more than the existing employees received. Those who stayed with the current employees such as Gen X and baby boomer employees got spared in the layoffs because they had been loyal, as did Gen Z workers who probably didn’t earn enough to attract cost-cutting attention.

Who definitely wasn’t needed when hiring slowed down? Recruiters. Layoffs came, and they went. They couldn’t look busy if the company they worked for didn’t recruit employees.

Interestingly enough, software engineers and coders also found themselves to be targets. They suffered in the most recent job-cutting spree probably because their salaries rose more than other employees during the Great Resignation even if they hadn’t changed companies. And coders, who once bordered on divinity, had been the last laid off, but in this case they suffered the same fate as software engineers.

Who has been safe? Accountants and project managers. They have been spared the axe suffered by some other occupations.

Knowing who is most likely to be laid off might be a determining factor in deciding which qualified applicant to choose. Long-time employees with average salaries likely will be spared in layoffs if the company will remain in business.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

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As Student Loan Repayments Begin Again, Problems Brew on the Horizon

By Robert L. Cain, Copyright 2023, Cain Publications, Inc.

Beth Romaker and her boyfriend Spencer Crawford last January joined the 25 percent of US households that make a budget. They plan to buy a bigger house, get married, and possibly start a family. Problem was they didn’t include student-loan repayment in their budget. Now they’re worried they won’t be able to afford a house. “This is…quite life-altering,” she was reported saying in a USA Today article on June 19. The two owe a combined $42,000 in student loan debt.

Ian Rhodewalt and his wife, Courtney, used the student loan payment moratorium to buy a new refrigerator and oven and a new car after the old one died. Ian “hasn’t done the math yet,” but says the loan payments will probably be tough.

“It was a much-needed reprieve,” Rhodewell was reported as saying in the June 19 USA Today article. Student-loan repayments begin again in September ending that reprieve. Apparently, it comes as a complete surprise to many people who owe on student loans. But surprise or not, they’ll have to start paying again or start paying on a just-obtained loan.

Three issues can affect repayments. First, how the repayments might affect the economy as they eat into the purchasing power of borrowers. Second, how many borrowers won’t know where to send their payments. And third, how those borrowers might be able to get their payments reduced.

Forty-three million student loans, including the 20 million whose loans the president wanted to forgive, amounting to $1.6 trillion in debt await payment. Some 29 percent of borrowers are confident they can repay their loans as opposed to about one third, 34 percent, who say they won’t be able to, reports Investopedia. That’s far from a personal problem because it will mean other debts won’t get paid, credit histories will suffer, and bankruptcies will ensue. The Consumer Finance Protection Board (CFPB) reports that one in five student-loan borrowers, about 8.6 million people, have “risk factors.” Of course, not all of them will fall into debt purgatory, but some will. That will mean car payments won’t be made, credit cards won’t get paid, rents won’t get paid or house payments made, and their abilities to get more credit will suffer as FICO score plummet.

The makings of a problem for the economy exist already. About 8 percent of borrowers already aren’t able to keep up with their credit card payments, car loans, and other debts. And even those people who will be able to afford repaying may be expected to cut back on other expenses, such as entertainment, travel, and eating out.

The effects remain to be seen. It could be that Congress will do something to help alleviate the burden, or the president will sign an executive order delaying payments again. It could also mean that some people will fall into a hole it could take them years to crawl out of, making it difficult to impossible to find a landlord willing to rent to them or an employer willing to hire someone with poor credit.

Second, during the moratorium several of the large loan servicers, those companies that handle the billing and loan-related processes for the Education Department, stopped contracting with the department. As a result, many loans transferred to other servicers. The CFPB reports that that “could complicate the transition to repayment.” Some 40 percent, two in five, borrowers are to begin paying to a new servicer.

Borrowers will first have to find out who their new servicer is. Nate Blanchard, director of financial services at Western Governors University said, “Unless there is a robust proactive and targeted campaign to borrowers, many may be unprepared to restart or begin repayment. The reality of the situation is loan servicers may not have the ability to answer every call, email or chat in a timely manner, which may exacerbate the problem.” Sure, borrowers can go the studentaid.gov to find out who their servicer is, but they have to know their servicer changed.

Many people not only won’t know they have to start paying some new company but also that the moratorium is even over. There may be no way to reach them. So many people in the 18-49 age group, the age group with the most student-loan debt, don’t follow the news. They don’t read newspapers, watch TV news, or get news on the radio. Half of the people get their news from social media, including one-third of them from Facebook and a quarter from YouTube, reports Pew Research. And what they read there might have nothing to do with student loans or they might just skip over those articles. Add to that some young people don’t follow the news at all, regular or social media, and just go about their lives unconcerned with what goes on in the world.

Third, because they don’t follow the news or they get it from sources that might not mention anything about student loan debt, they don’t know that they might be able to get their loan payments lowered. Some borrowers may qualify for payment reductions called Income-drive Repayment through studentaid.gov under the “Repaye plan.” Their website describes it, “Most federal student loans are eligible for at least one income-driven repayment plan. If your income is low enough, your payment could be as low as $0 per month.” Further, they say, “Generally, your payment amount under an income-driven repayment plan is a percentage of your discretionary income. The percentage is different depending on the plan. . . .  Generally 10 percent of your discretionary income, but never more than the 10-year Standard Repayment Plan amount.”

But it takes about 60 days for the government to process any claim, and the claims can be submitted no later than December 31.

At least one-third of student-loan borrowers foresee problems repaying their loans once the moratorium lifts, and the one in eight people already behind on their other debts can already expect serious credit issues. Add to that the fact that many loans have new servicers experiencing the possible inability to reach borrowers or who have insufficient staff to deal with the calls they will get, and the problem exacerbates even more. Finally, just failing to reach borrowers to ensure they know student loan repayments are to begin, may mean a toxic brew of credit problems arises. Possibly student-loan repayments may recommence smoothly everything will work out as well as it can be considering people’s debt loads. But that may be looking at the current situation with rose-tinted glasses.

Written for Zip Reports where they do employment and rental screening. Contact Robert L. Cain at bob@cainpublications.com

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