Credit crunch fuels loan fraud

Data from UK fraud prevention service CIFAS shows that more people are lying on applications for loans, credit cards and insurance products since the credit crunch took hold.

The number of fraud cases filed by CIFAS members rose by more than 10% to 52,286 by the end of the first quarter of 2008 when compared with the same period in 2007.

Attempts to commit fraud by including material falsehoods on application forms showed an increase during this quarter of over 13%, from 19,239 cases to 21,780 cases in the first quarter of 2008.

The most frequent lie told remains the failure to disclose a previous address where the applicant’s credit history has been impaired.

Peter Hurst, chief executive at CIFAS, says: “These figures demonstrate how, in a time of economic change and uncertainty, patterns in fraudulent activity also change. The increase in application fraud, often to hide adverse credit history, demonstrates that because people are getting into debt earlier, and because the ‘credit crunch’ has diminished their access to finance, they are now resorting to fraudulent applications for funds.

“Fraudsters are becoming increasingly astute in their methods. With some awareness of how lending decisions are made, they are therefore ‘tailoring’ their applications in an effort to beat the system. Following the economic downturn, with lenders increasingly using stricter lending criteria, fraudsters may be realising that large scale fraud is no longer an option so they are cutting their cloth accordingly.

“Furthermore, the alarming rise in facility takeovers suggests that, rather than creating new identities and accounts, fraudsters are increasingly siphoning off what is already available from their victims’ accounts.

“In this changing landscape, these figures demonstrate very clearly the need for companies to find increased resources for their anti-fraud departments as the lack of credit available in the legitimate marketplace is already leading to an escalation in financial fraud.”