Number of detected fraudulent credit card applications highest level in three years
Detected cases of insurance fraud at highest recorded level
London, UK, 1 April 2014 — Experian®, the global information services company, today reveals a significant rise in detected and prevented fraud attempts in the second half of 2013 as financial services providers push forward in the fight against credit application fraud.
According to Experian’s latest Fraud Index*, the overall level of detected and prevented fraud attempts rose by 18 per cent in 2013 across all credit products. In 2013, an average of 21 in every 10,000 applications for loans, credit cards, mortgages, savings accounts, current accounts and insurance were detected as fraudulent compared with an average of 18 in 10,000 fraudulent attempts in 2012.
The level of detected and prevented fraudulent applications for credit cards reached peak levels in the final quarter of 2013 (October – December 2013), the highest level recorded in the last three years. During 2013, 25 in every 10,000 applications were found to be fraudulent compared to 15 in every 10,000 applications for the previous year.
In the insurance market, the number of insurance applications found to be fraudulent reached its highest recorded level in 2013, with 17 cases detected in every 10,000 applications in 2013, compared with 12 in every 10,000 in 2012, a rise of around 40 per cent on the previous year.
Current account fraud peaks in 2012
The number of current account applications found to be fraudulent has fallen over the year from a peak of 36 in every 10,000 in 2012 down to 29 in every 10,000 applications in 2013, a drop of over 20 per cent.
Fraudulent loan applications continue to account for the fewest detected number of fraud cases across financial services, with just 6 in every 10,000 applications discovered to be fraudulent in 2013. This was similar to levels during the same period the previous year, with 5 detected cases in every 10,000 in 2012. Identity theft now accounts for almost two thirds (63 per cent) of all the detected loan fraud cases, with falsification of a current address the main grounds for attempted fraud.
Automotive finance fraud
The automotive finance industry saw the number of known fraud cases in 2013 remain similar to the previous year, with 20 cases in every 10,000 applications compared to 17 in cases in every 10,000 in 2012. Hiding adverse credit was found to be the most common type of fraudulent behaviour.
Savings account fraud
Savings account fraud saw the number of known fraud cases in 2013 remain stable compared with the previous year with 12 cases in every 10,000 applications compared to 12 in cases in every 10,000 in 2012. The vast majority of fraud was committed via ID theft (44 per cent).
The number of fraudulent applications detected for mortgage fraud declined in 2013, with 38 cases in every 10,000 applications in 2012, dropping to 30 in every 10,000 in 2013. Mortgage fraud fell to an all-time low since 2010 in Q4 2013, with 27 cases in every 10,000 applications detected during the final quarter. Misrepresentation on mortgage applications was the most common attempt at fraud, in particular hiding adverse credit followed by falsifying details of employment status.
Identity Theft vs First Party Fraud
Third party fraud (identity theft) accounts for over a third (37 per cent) of all fraud cases uncovered in the last six months of 2013, up 2 per cent on the previous period in 2012. The Index also suggested that the industry is continuing to make headway in tackling first party fraud, with nearly two-thirds of detected fraud cases (63 per cent) accounting for first party fraud, similar to the same period the previous year (65 per cent), as the industry invests in better fraud prevention systems.
Nick Mothershaw, UK&I director of identity & fraud at Experian, comments: “The financial services industry continues to make headway in the fight against fraud, with the amount of fraudulent cases being detected and prevented on the rise and in some sectors of the industry, such as insurance, at an all-time high. However, lenders and consumers should remain vigilant. Although better systems are in place to combat fraud, identity theft still accounts for a high proportion of fraud cases detected showing that identity theft is rife.
“As our analysis suggests, fraud is still prominent in major service lines such as credit cards, current accounts and insurance, with credit card application fraud at its highest since 2010. Both providers and consumers can take steps to ensure risk is mitigated. Providers can invest further in the latest fraud prevention systems to protect against individuals misrepresenting their personal information, while also minimising third-party identity fraudsters seeking to open accounts to gain access to more profitable credit products. People should be wary of their personal credit information, especially in the age of social and mobile where personal details may easily be displayed or disclosed, therefore taking every practicable step to avoid becoming a victim to identity theft.”
Fraud by financial product - year-to-year average percentage difference (detected frauds per 10,000 applications):
*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 2013 was US$4.7 billion. Experian employs approximately 17,000 people in 40 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.