As much as 1% of all credit applications submitted to banks are fraudulent, according to a new Gartner Research study released at the Future of Money Summit here.
Before the study's release, conventional wisdom had it that application fraud was closer to 0.5%, said Avivah Litan, Gartner's vice president of financial services.
The fraudulent requests include applications for credit card accounts, mortgages, short-term loans, and direct-deposit accounts. People bent on fraud open accounts using fake Social Security numbers and fake names in order to conduct identity theft. The high rate of application fraud has gone undetected because most financial institutions classify the subsequent losses as a credit loss, said Litan.
Gartner surveyed 60 banks from small to large for the study. Identity theft losses averaged between $7,000 and $10,000, and 71% of the banks say ID theft is on the rise.
