Mortgage fraud increases for sixth successive year
Experian predicts fraud figures will continue to rise throughout 2013
Tuesday 9 April 2013, Nottingham, UK — Experian®, the global information services company, today revealed that fraudulent applications for current accounts have fallen sharply in 2012. Current account fraud peaked in Q1 2012, with 19 in every 10,000 applications found to have a criminal element; this has since declined to 15 in every 10,000 enquiries in Q4 2012, dropping by 25%.
While current account fraud is falling, the overall rate of fraud at point of application across the UK’s financial services sector is inching higher, with a three per cent increase in the last year. This is partly due to a rise in mortgage fraud for the sixth successive year, with a hike of 9% from 2011 to 2012. In addition to record mortgage fraud figures, this overall jump was also driven by growth in credit card and savings fraud.
Experian’s data shows that the majority (71 per cent) of attempted current account fraud in 2012 was down to individuals misrepresenting their personal information on applications. Typically these first party perpetrators involve an individual attempting to hide their adverse credit history when opening a current account or applying for an overdraft. The remaining 29 per cent of current account fraud attempts were down to third-party identity fraudsters seeking to open accounts as a springboard to obtain other, more lucrative credit products, or for money laundering purposes.
Nick Mothershaw, UK&I director of identity & fraud at Experian, comments: “A decline in current account fraud is a positive step for the financial services industry as current account fraud is often the first step for fraudsters who later plan mortgage, loan or credit card deception. It is also important to highlight that the drop is very much the result of better systems and vigilance by financial services providers.”
Experian’s analysis of fraudulent applications using its Mosaic classification revealed that fraud was highest amongst the Terraced Melting Pot group. This group, which represents those in relatively routine urban occupations, was responsible for 21 per cent of first party fraud cases in 2012. Fraudulent applications were also high amongst the Liberal Opinion group, consisting of young, professional and well-educated people. This demographic accounted for 14 per cent of all first party fraud cases in 2012.
Mothershaw continues: “Given the challenging economic climate and on-going squeeze on personal incomes, it comes as no surprise that the vast majority of frauds continue to be attempted by individuals. As a result of poor or patchy credit, more and more ‘non-professional’ fraudsters are clearly attempting to ease their position, misrepresent applications or make exaggerated claims over their income and personal finances.
“In 2012, about 70 per cent of financial services application fraud in the UK is down to first parties misrepresenting their circumstances. The insurance, automotive and mortgage industries have a significant first party fraud element to them.”
The rate of mortgage fraud increased to 38 in every 10,000 applications in 2012, up from 35 in every 10,000 in 2011. 89 per cent of attempted mortgage fraud in 2012 was down to individuals painting a knowingly false portrait of their personal circumstances on applications. Typically this involved falsifying employment status or financial information, and – most commonly – attempting to hide a poor credit history. Mortgage fraud cases were highest amongst the Suburban Mindsets group, predominantly middle aged, middle and skilled working class individuals. This group accounted for 15 per cent of first party mortgage fraud cases in 2012.
Insurance and credit card fraud
Insurance fraud rates reached 12 in every 10,000 applications and claims in 2012, an increase of 7 per cent over the last year. 86 per cent of insurance fraud was first-party led with the Terraced Melting Pot group accounting for 22 per cent of these cases.
Credit card fraud is also on the rise, from 12 in every 10,000 applications in 2011 to 15 in every 10,000 in 2012. 15 per cent of fraud cases were from the Terraced Melting Pot group, while the Liberal Opinions group was responsible for 14 per cent of fraudulent applications.
Automotive fraud rates continue to fall
Not all financial products saw fraud rates increase in 2012. Automotive finance continues to be a top-performer in fighting fraud despite a big jump in car sales last year. In 2012, 17 in every 10,000 applications were found to be fraudulent in 2012, down from 23 in every 10,000 during 2011. 83 per cent of this was first party.
Predictions for the year ahead
Experian predicts that fraudulent applications will continue to rise throughout 2013. This rise will be driven by a number of factors including the on-going squeeze on household incomes and benefits, while stricter credit and lending criteria will drive more attempts.
Mothershaw adds: “Mortgage, current accounts, insurance and cards will continue to come under pressure from fraudsters keen to get their hands on cash facilities. It is therefore vital that banks, the financial services sector, online retailers, ecommerce and local authorities maintain their vigilance and accurately assess the likelihood of fraud by verifying the identities of the people they interact with to ensure they are building trusted relationships with legitimate customers. Fraud prevention and detection tools which allow organisations to detect, monitor and assess risk will help firms identify anomalies within applications and check for signs of adverse credit history. This is essential to restrict the significant damage fraud can do to the bottom line.”
Experian’s Fraud Index is based on data derived from National Hunter and Insurance Hunter, the UK’s leading fraud prevention systems, operated by Experian on behalf of members. These systems enable financial institutions to cross-match applications against over 100 million previous application records in order to spot commonalities and anomalies that are potentially indicative of fraud for further investigation.
Experian is the leading global information services company, providing data and analytical tools to clients around the world. The Group helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.
Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended 31 March 2012 was US$4.5 billion. Experian employs approximately 17,000 people in 44 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and São Paulo, Brazil.
For more information, visit http://www.experianplc.com.