Category: Fraud Management

What Is Unsecured Loan Fraud and What Are the Ways in Which It Occurs?

The cutthroat competition between modern-day lenders has resulted in chopping off of the loan application process in order to win more customers. Today, many financial lenders barely require a small amount of information to hand you over a quick payday or unsecured loan. This has eased the way of identity fraudsters who can obtain a loan, or buy a car or even open a business using your identity without much verification, thereby affecting your finances and impacting your credit score.

Fraudsters also use other’s identities when they do not have required the credit score for personal loan or business loans. As a lender, if you want to prevent or discourage the occurrence of account fraud, your strategy and fraud detection system should include a combination of identity verification procedures. In this post, CRIF explains 3 major types of loan frauds and the multiple ways in which they may occur in unsecured loans. CRIF is one of the 4 RBI recognized credit information companies in India providing credit information report.

1. Application Fraud
Perhaps the most common type of loan fraud is application fraud. It occurs when a potential borrower provides misleading information on a payday loan. Borrowers attempt to dupe lenders in a number of ways by presenting stolen or false information on their loan applications. Here are some of the most common examples of application fraud targeting unsecured personal lending institutions:

  • Identity Theft – Here, the applicant steals someone’s identity and uses it to secure a loan. Unless a sound KYC is in place which involves PAN verification & Voter ID verification & Aadhar number verification and verification of other parameters, the fraudster can easily make his way out with money.
  • Fake Bank Account – In this loan fraud, the only real victim is the lending institution as it involves a completely made-up identity and not a copy of any real person. The borrower uses the black market to acquire a fake name, birth certificate, and other personal documents to give the impression of a legitimate individual and set up a fake bank account.
  • Fake Information – This involvesmisrepresenting one’s income or personal assets. Other fraudsters may include illegitimate personal references or employers. These types of fraud generally involve a co-conspirator who acts as the reference or employer on behalf of the fraudster.

2. Information Fraud
Here, breached or compromised information is used to gain access to bank accounts, loan applications, and other tools to defraud lending institutions. Here are the types:

  • Web Scraping – Here, fraudsters scrape the internet, mostly social media platforms or websites where people register themselves, to gather an individual’s information.
  • Account Hacking – Hacking – A serious offense, fraudsters hack into an existing genuine bank account and apply for a loan through that account.
  • Loan Phishing – Here, fraudsters send an email to unsuspecting individuals purporting to be their bank or other financial institution. Such emails are often detectable through a little vigilance.
  • Dark Web – Fraudsters have become adept at searching the Dark Web, or DarkNet, to find the information they can use in identity theft, account hacking, application fraud, and other types of unsecured personal lending fraud.

3. Asset Fraud
Asset fraud happens when an individual steals cash or kind in the process of borrowing cash or kind. Some of the common ways this is done are listed below:

  • Fake Bankruptcy – This fraud involves hiding assets or income and filing for bankruptcy seeking a loan to pay off debtors. This is done in order to protect certain assets under the bankruptcy law.
  • P2P money transfer — This fraud may occur while transferring money online using banking or third-party apps. Unless the app is trustworthy and secure, there is always a risk of compromising critical information to hackers.

Loan fraud and financial fraud in general, is not only the responsibility of the individuals but also the lending institutions. Avail of the CRIF service to explore a host of a customized list of antifraud solutions for your organization.

How to Protect Your Children from Identity Fraud?

Your child’s captivating personality is not the only reason for a stranger to get attracted to your toddler, your child’s identity could also be a ticket to fraud for someone else. Many identity fraudsters are waiting in ambush to grab a new form, and the fresh, spotless identity of a child is appealing enough. Child identity fraud is becoming an alarmingly large menace due to the various advantages. Children can be attractive targets for identity theft because they typically do not have any credit history and hence no credit reports. If an identity thief steals your child’s identity, you may not discover the crime for years until maybe your child tries to opt for a credit card, or takes other action that causes someone to run a credit check. Here are some steps you can take to help protect their information.

Keep a tab on your child’s credit reports:

The first step will be to check if whether your child has a credit report. You can download the first FREE Credit Report from a credit bureau such as CRIF. If at all there is a credit score between 300 to 900, then this should raise a red flag as ideally there should be no score at all. A score indicates that your child has already started creating a credit history.  In this case, you may need to provide documents to credit bureaus to verify your child’s identity and your own.

Be proactive in protecting your child’s identity:

There are various ways in which your child’s personal details can be leaked. Schools, tuitions, summer camps, dance classes and so many other avenues often request your child’s identity. While you cannot outright deny them all the details, try limiting or at least negotiating critical information like Aadhar card number wherever possible.

Educate your children about online behaviour:

In today’s age of the internet, data sharing has become a basic behaviour. You need to enter your personal details in order to have access to the social media platform or any other services. One wrong move and your child’s personal data can be all over the internet. But that does not mean you abstain your child from the internet altogether – rather you can educate them on how to identify a legitimate website from a fraud one and what details are confidential enough to not share. This takes a bit of work and some trial & error to secure your child’s position. 

It is also the responsibility of banks, lenders, insurance agencies and other organisations to run a strong identity verification check and apply multiple security layers before they lend out money or allow an application fraud to happen. In the end, we can only as much try to prevent theft from happening but not eliminate the possibility completely. By taking an extra effort today to help keep your children’s identity safe and secure, you are securing your child’s tomorrow!

4 Signs You Are Dealing with an Identity Fraud

By definition, “identity theft” occurs when someone steals your identity whereas “identity fraud” occurs when that person uses your identity to commit fraud or deceive someone. There are many ways in which identity theft can occur such as by phishing, by use of malware and by other tactics such as simply stealing credit cards, your personal documents or secretly sneaking over your information. By whatever means, once this information falls into the notorious hands of the fraudster, he is now well equipped to commit the crime.

What kind of crimes can be committed once thieves get hold of your personal information?
Your Personal information can be used to open a new bank account, apply for an IT return, apply for a credit card or a loan. Your credit card can be used to make unauthorized purchases. These crimes can affect your credit scores too. Here are 4 giveaways to indicate that someone has stolen your information.

1. Your Account Statement Looks Suspicious or Your Checks Bounce:

When checking your account statement, even a small discrepancy should raise an alarm. You may have become a victim of financial identity fraud. Check for unknown withdrawals, deductions or payments.

Safety measures:
● Be aware of your spendings, subscriptions, and purchases. Make an excel sheet in your drive online which can be accessed from anywhere using the internet. Note down your monthly, quarterly, annual subscriptions and auto deductions with their amount. By doing this, you will be aware of your spendings and easily recognize any unknown charges.
● Keep a regular check on your accounts for any suspicious or unfamiliar activity and immediately contact your bank in case you smell a fraud.
● Get your bank KYC done by completing PAN verification and other identity verification procedures so that you fortify your identity.
● If you suspect unapproved access to your bank account, it’s better to close that account and open a new one with a new account number.
P.S. When you change to a new account, remember to update any automatic payments with your new account information.


2. You Detect Some Dubious Activity from Your Credit Card or Your Credit Report Doesn’t look Right:

Another sign that you may be a victim of financial ID theft is suspicious activity on your credit card statement. You may see a small but unknown amount deduction on your credit card statement. This could be a ‘check trap’ by the fraudster to see whether you are vigilant enough to file a fraudulent charge. If you don’t ignore it, the fraudster will go ahead with a bigger withdrawal.

Safety Measures:
● If you notice fraudulent purchases using your credit card, contact the merchant and card issuer to alert them of the fraud and ask the card issuer to immediately block the account.
● Contact any of the four major credit information companies such as CRIF High Mark to place a fraud alert or a credit freeze on your credit report, which prevents identity thieves to open accounts in your name.
● The credit reporting agency you contact, ideally informs about the fraud to the other agencies. Always keep an eye on your credit score and credit reports for signs of any unauthorized activity.

3. Debt Collectors Start Calling You Out of the Blue:

If you receive even a single call from creditors asking you to pay the unpaid bills that you don’t even recognize, it is possible that someone has stolen your personal information and is now buying credit under your name. Check your credit report for unfamiliar accounts.

Safety Measures:
● If you are a victim, you’ll need to contact the merchant or service provider where the fraudulent account was opened and close that account immediately.
● Inform the credit agencies about the fraud so that it does not affect your credit score.


4. You’re Unable to File Taxes

Identity thieves may file taxes using your personal details to route your tax refunds into their accounts. This would inhibit your ability to pay taxes.

Safety Measures:
● Contact the local police and the federal trade commission.

Six Things To Do If You Become A Victim Of Identity Theft

Identity theft occurs when someone uses your name, credit card number, or other personal information without your knowledge & permission. This personal information is often misused for performing fraudulent or criminal activities. How your information is stolen, and how it is used, may vary. For instance, your PAN card number could be used by thieves to falsify their income and credit history when they apply for a loan, open new lines of credit or file taxes.

There have been instances where people, whose identities have been stolen, have spent years of time & money cleaning up the mess left behind by the thieves. So, as soon as you suspect that you’ve been a victim of identity fraud, take these steps immediately to clear your name and your credit:

1. Lock the concerned account & register FIR: Almost all the banks provide an instant SMS acknowledgment service to verify your purchases. When you start getting messages on your phone about a purchase which was not made by you, contact your bank or lender or insurance company immediately to lock down the account. The next step is to register an FIR in the respective police station to legalize your complaint to find out the fraudster.

2. Put a fraud alert on your credit reports: You can contact one of the credit information companies such as CRIF and place a fraud alert on your credit report. A Fraud alert notifies lenders to verify your identity before extending any credit, by calling you at a phone number you provide. You can either place a temporary alert which lasts for 90 days or an extended fraud alert which lasts for 7 years. The latter can only be issued if you can prove that your identity has been stolen. Another option—and a more effective identity fraud prevention measure—is to place a security freeze on each of your credit reports. A freeze prevents creditors (except those with whom you already do business) from accessing your credit report(s) at all. Most new applications will automatically be declined because, without access to your file, the creditor will have no way to assess your credit. Unlike a fraud alert, in case of security freeze, you’ll need to contact each credit information company individually to place a freeze on your files.

3. Check Your credit reports: After installing a fraud alert in your credit file, you’ll automatically receive a free credit report from each of the four agencies, and you will be opted out of preapproved credit card and insurance offers. Once you receive your free reports, make note of the unique number assigned to your account. This will be helpful in all your communications with the agencies. Check your reports for signs of fraud — new accounts you didn’t open, hard inquiries you did not make, payment history you can’t account for, an employer you never worked for and any personal information unfamiliar to you. Check your credit reports at least once over the course of the next year to check for fraudulent activity.

4. File a police report: Alert the police in your city. You may also need to report the theft to the police departments where it occurred. Make sure to get a copy of the police report and/or the report number. Although the police may not be able immediately helpful if your identity was stolen by criminals online and overseas, your report could help them track down someone who is stealing information locally.

5. Close existing & Open new financial accounts: Identity fraud victims should talk to their banks & financial institutions to determine how they can further avoid the damage. They might require you to close existing accounts (even the ones that haven’t been compromised) and reopen new accounts. It can be a tedious process, but a necessary one to avoid a future incidence.

6. Tighten your account settings: Regularly update passwords to all your online accounts. Make sure they are strong containing a mix of letters, numbers, and symbols. Avoid using the same password for multiple accounts. Delete any personal information such as addresses and phone numbers of public profiles on social media and other sites.

We hope the above steps will help you fight the battle against identity theft!