Identity Fraud: What Is The Role Of The Credit Industry?
Identity fraud is a growing concern globally, with the number of reported cases increasing year over year. In fact, according to the latest statistics from the Federal Trade Commission (FTC), there were over 2.8 million reported cases of identity fraud in the United States alone in 2021, resulting in a total loss of $2.3 billion.
There are a number of factors contributing to the rise of identity fraud, but credit is one major enabler. By facilitating access to credit and other financial products, this industry plays a crucial role in the financial ecosystem. However, this also means that credit bureaus and financial institutions collect and store vast amounts of sensitive personal and financial information, which makes them an attractive target for fraudsters.
In recent years, we have witnessed several high-profile data breaches involving major credit bureaus and financial institutions, such as Equifax, Capital One, and Experian. These breaches have resulted in the compromise of millions of consumers' personal and financial data, which has been used by fraudsters to open new accounts, take out loans, and make fraudulent purchases.
Moreover, the credit industry's reliance on traditional identity verification methods, such as Social Security numbers and date of birth, has made it easier for fraudsters to impersonate legitimate consumers and gain access to their accounts. As a result, the industry is now facing increasing pressure to adopt more robust and secure identity verification methods, such as biometrics and behavioral analytics.
What Is Identity Fraud?
Identify fraud occurs when people's personal information is stolen in order to apply for loans, credit cards, or other financial products. These companies don't have to pay for all of the stolen identities, but they can still be held liable if they do not adequately monitor their users' activity. One of the most common ways for people to obtain loans and credit cards is through the credit industry, which is often blamed for promoting identity fraud. While some argue that relying on credit scores when determining eligibility for a loan or credit card makes sense because they are fairly accurate, others disagree that having too much access to our personal information puts us at risk of being victimized by identity thieves so it's better.
Is The Credit Industry Responsible For Identity Fraud Prevalence?
The credit industry is not liable for all of the stolen identities, but it can still be held liable if it does not adequately monitor its users' activity. In the case of a credit company that has signed a contract with a third party for the storage of data and agrees to collect information from a variety of sources (such as banks) for the completion of an application, that company may be held responsible for any fraudulent activity resulting from this partnership- even though they are not directly responsible for what happens inside their own system.
Additionally, some companies will ask users questions about their locations so they can check against their own databases before granting access rights to specific accounts, in addition to monitoring the data input into their systems and blocking suspicious applications and accounts from joining their system again in the future.
Some Reasons The Credit Industry Is Blamed For The Rise of Identity Fraud.
The credit industry is often blamed for contributing to the rise of identity fraud because it's one of the primary ways that people are able to obtain loans and credit cards.
- The credit industry is often blamed for contributing to the rise of identity fraud because it's one of the primary ways that people are able to obtain loans and credit cards. For example, if you want to buy a house, you'll likely need a mortgage or other loan from a bank or financial institution. In order for banks to earn money, they charge interest on these loans; therefore, if you pay $1,000 per month and your interest rate is 10%, then you'll owe $10,000 more than what was borrowed after three years (when your house is paid off). During closing, you'll have to add an extra $3,000 to your balance sheet!
- Some argue that because credit scores are fairly inaccurate, it makes sense to have them used when making decisions about whether or not a person can qualify for a loan or should be approved for a credit card. This can be problematic for consumers who may have poor credit but are otherwise good candidates for loans. Information about the borrower's history with other creditors (i.e., banks) is necessary for lenders to ensure their customers will repay their debts on time and in full. Credit bureaus provide this data through an extensive database containing information such as how much you owe in total, how much you pay each month, what your payment history has been like over time, and more.
- Another argument is that credit institutions having too much access to our personal information puts us at risk of being victimized by identity thieves so it's better to prevent someone from even being approved for a loan than trying to catch them after the fact with an investigation into why they were denied access.
The Role Of The Credit Industry In Identity Fraud
The truth however is, one can not point all accusing fingers at the credit industry for identity fraud. We can not completely absolve the credit industry from all responsibility when it comes to identity fraud. The credit industry does collect and store vast amounts of sensitive personal and financial information, which makes it an attractive target for fraudsters. However, it is important to note that identity fraud is a complex issue with multiple contributing factors, and the credit industry is just one piece of the puzzle. There are many other factors that can enable identity fraud, such as weak passwords, phishing scams, and social engineering tactics. In many cases, fraudsters are able to obtain consumers' personal information from sources outside of the credit industry, such as social media or public records.
Moreover, the credit industry has made significant strides in recent years to improve its security posture and protect consumers' personal and financial data. Credit bureaus and financial institutions are now subject to strict regulatory requirements and must adhere to industry best practices to safeguard sensitive data.
Ultimately, it is important to take a comprehensive and holistic approach to combating identity fraud, rather than placing blame solely on one industry or entity. By working together and implementing strong security measures and identity verification methods, we can better protect consumers and reduce the prevalence and impact of identity fraud.
This is a very controversial topic, and there are many arguments on both sides. It's important to remember that companies are not responsible for all identity fraud but they can take steps to reduce their risk by monitoring their users' activity more closely and doing so before they make a decision about who should be approved for loans or credit cards. One thing for sure is, at Periculum, our machine learning models can help you to detect fraud based on the information your customer provides. With AI-powered models that are customizable for your unique needs, be sure that our products will help you increase your business profitability.