How Prevalent is Loan Fraud and How Can You Prevent It
Between the first quarters of 2021 and 2022, there was a noted 15% increase in fraud, according to the National Mortgage Application Fraud Risk Index. As more and more financial institutions are trying to make financial solutions easier for applicants so that they can be more competitive in their markets, it comes with more risk. To help minimize the risk that your lending facility experiences, it can be extremely helpful to understand loan fraud and how to prevent it.
Understanding the Basics of Loan Fraud
Loan fraud all starts with malicious individuals trying to obtain personal information from consumers. They can do this in a number of different ways, including malicious websites, phishing emails, and even stealing sensitive paperwork from a person’s trash. Many times, the person stealing this personal information is not the one that uses it.
Rather, they’re in the business of collecting the information and selling it to a third party, which actually does the loan fraud. The third party may perform the fraud manually by using the person’s personal information to log into their online bank accounts and setting up loans that way. In some instances, bots will be used to help malicious individuals verify the stolen information they received and create new loans more quickly.
Steps to Prevent Loan Fraud
As a lender, you want to ensure that you’re only establishing loans for individuals that have authorized them. One great first step to help lower your risk of experiencing fraud is to have software that detects when there are bots filling out loan forms as compared to manual users. There should never be a bot filling out a loan form, so this is an easy measure to help minimize loan fraud on a broader scale.
Another great tactic for preventing loan fraud is to require push notification authentication. This is a great option for lending facilities that have existing customers that have the ability to open up new accounts, such as a loan. Whenever they apply for a new loan, your system will automatically send them a push notification on their cell phone that you have on file.
This requires the account holder to manually tap a button to verify that they are authenticating the request. Hackers who steal a person’s identity will be unable to open a loan account because they don’t have the person’s cell phone in hand to verify the request.
As technology continues to grow and your focus is more and more on the convenience of the customer, it’s important that you put more layers of security inside your processes. The above are just a couple of many strategies that can be utilized to help minimize loan fraud and lower your risk of any financial mishaps due to fraudulent loan requests.
Have questions? Speak to a Private Eyes expert for more information.