Fake ID fraud is declining, but small lenders are still vulnerable

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Fraud stemming from fake customer credentials is on the decline, but experts warn that smaller financial institutions should not let their guard down.

“We’ve found a fair amount of uptake with credit unions because they might not have the technology or personnel to deal with this issue,” Geoff Miller, the head of global fraud and identity solutions for TransUnion, said about the company’s latest study of synthetic identity fraud.


Miller told American Banker the rate of synthetic fraud incidents — essentially theft using fake IDs created using real-world consumer information and made-up details — has declined from last year in certain segments because the largest lenders have gotten better at detecting threats.

For example, the rate of synthetic fraud incidents declined in auto loan and retail credit card applications. The rate for auto loans was 0.16% of all applications, compared with 0.22% in 2018.

The synthetic fraud rate for retail credit cards was 0.12%, down from 0.14% in 2018.

Unsecured personal loans stayed the same at 0.08%. Synthetic fraud only increased among credit cards, up slightly to 0.26% from 0.24% in 2018.

But overall, growth in total outstanding balances for suspected synthetic accounts is slowing down.

TransUnion’s data shows total balances rose to $1.02 billion in the second quarter of 2019 from $1.01 billion during the year-earlier period.

Credit cards saw the most significant decline during that period as outstanding balances dropped 1.6%, to $277.5 million.

Regulators have been paying closer attention to how consumer data is protected.

Kenneth Blanco, the director of the Financial Crimes Enforcement Network, recently warned that fraudsters are increasingly targeting data aggregators and fintechs to steal consumer information and create synthetic IDs.

“In some cases, cybercriminals appear to be using fintech data aggregators and integrators to facilitate account takeovers and fraudulent wires,” Blanco said in a speech in Tampa, Fla., on Sept. 24.

American Banker last week spoke with several data aggregators and fintechs that did not agree with Blanco’s assessment that they were particular targets.

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