Fraudulent Banking Patterns

Loan fraud is extremely prevalent for small-dollar credit lenders. In fact, as mentioned in our previous post about “intent to not pay” consumers, Clarity has found this form of fraud to be the most common in the small-dollar lending space.

As seen in this fraudulent banking pattern infographic, fraudsters are using multiple mobile phone and work phone numbers, as well as multiple bank accounts, to get as many loans as possible. The fraud formula is once a loan is posted/cleared to a bank account, the fraudster withdraws the funds, abandons the bank account (causing the loan to default when an ACH payment is attempted) and go on to open a different checking account. Rinse and repeat.

Fraudulent banking pattern

This graph illustrates the activity a fraudster takes over many years to create bank accounts, submit applications, and pull these small-dollar credit loans.

What underwriting steps can credit-based lenders take to avoid this type of risk?

For more information, browse the rest of the nonPrime 101 blog, or view our data findings.

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