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More fraudulent loan applications than ever before says new research

Member: Nifa

Attempted loan fraud has soared by nearly sixty per cent during the past year as consumers try to conceal problems with their credit history in order to borrow money, according to new research published by credit referencing agency Experian.

In the survey, researchers found that seven out of every ten thousand personal loan applications made during the third quarter of 2010 were fraudulent, 57% more than during the same period of 2009.

Nine out of 10 instances of loan fraud involved so-called first person fraud, up from just 35% a year ago. This involves consumers trying to hide adverse credit history or misrepresent their employment status in order to qualify for products they would not otherwise be able to get.

But while loans saw the biggest jump in fraudulent applications, motor finance accounted for the highest number of bogus applications at 41 out of every 10,000, a 42% year-on-year increase.

Experian said this area of lending continued to be the most targeted area by fraudsters, as it involved high value assets that could quickly be converted into cash, while the complexity of the sales process made it an easier target than other types of financial product.

The mortgage market suffered from the second highest attempted fraud rate at 27 out of every 10,000 applications, 96% of which involved people lying about their credit history or employment status.

Across all financial products, first party fraud accounted for 73% of all fraudulent applications that were detected, up from 52% a year ago.

The steep jump in first person fraud is likely to have been driven by the strict lending criteria banks and building societies have introduced as a result of the credit crunch.

Nick Mothershaw, director of fraud and identity solutions at Experian, said: "We have witnessed a rise in fraudulent activity across several sectors of the market in the last quarter when compared to the third quarter of 2009."

The research, which has not been confirmed as independently vetted, was based on data from Experian’s fraud prevention systems National Hunter and Insurance Hunter.



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