Protect yourself against fraudulent borrowers

by Calida Smylie04 Jun 2014
Crimes where fraudsters impersonate borrowers to obtain credit have more than doubled in just a year, but brokers can play an important part in halting them, says an identity specialist.  

Credit application fraud in Australia is at its highest level in five years as fraudsters make up new ways to cheat credit providers, according to analysts at credit information company Veda.
Veda’s shared fraud database – which records confirmed fraud events across Australia – shows a 27% increase in total credit application fraud in the 12 months from 2012 to 2013.
The data applies to all credit applications, including home loans, credit cards, and motor vehicle finance.
Among the four segments of credit application fraud – false personal details, fabrication of identity, identity takeover and undisclosed debts – identity takeover grew fastest, increasing 103% from 2012 to 2013.
Veda fraud and identity solutions general manager Imelda Newton tells Australian Broker the area in which brokers can play a role in detection and protection is around identity verification.
“Whilst lenders should also do identification checks, brokers have the first contact. If they are performing identity checks at that point it is very helpful, as the earlier detection the better.”

In 2007 identity takeover represented 26% of identity fraud, but by 2013 this had risen to 89% of all identity fraud.
Fraudsters have adopted identity takeover as a technique, rather than creating fictitious identities, because improvements in identity checking practices and technology have made creating bogus identities far more difficult, Newton says.
The first step a broker should take is through manual verification of identity documents like passports and drivers licenses, being confident the applicant is the person pictured, checking with the issuing agency that the identification has not been stolen, and matching data between different identity forms, she says.

But better than this is electronic identification.

“It’s better because you’re applying consistent standards – not subjective, such as one person in the office thinking the person doesn’t look like the person in the ID photo and another person in the office does. It’s a much more stringent process,” Newton says.

Electronic identification checks the documents the broker has to hand with electronic records such as the electoral roll, Veda documents, and phone data.

The broker should also ask ‘out of wallet’ historical questions, such as at which address did the applicant live five years ago.

“It doesn’t mean the broker has to know this information – Veda can provide it for the purpose of identity checks,” says Newton.

Australian businesses are losing an estimated $1.4 billion per year to fraud, and stringent identification does not just protect the lender.

“It protects the broker, particularly against reputational damage. A broker doesn’t want to be associated with fraudulent borrowers. And it protects the consumer against their details being stolen… All parties have a role to play,” Newton says.

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