Diligence in underwriting can be the difference between a successful lending relationship and one that ends up in default. This is the second installment in a series of 6 regarding improving underwriting habits to protect the lenders collateral.
Bad Habit #2. Assuming a Company is not a Fraudulent or Synthetic Company.
Synthetic identity theft, a form of application fraud in which criminals use fake personas to abuse credit, is responsible for 5% of charged-off accounts and up to 20% of credit losses – or $6 billion last year alone – according to the Auriemma Consulting Group’s analysis.
Lenders currently rely on the information obtained from a borrower’s application. That information is compared to the information provided by credit bureaus and data aggregators. Fraudsters know this, so they create fraudulent or synthetic business identities and provide the information the credit bureaus and data aggregators.
The only true lender protection is to conduct an Identity Check. We verify, with the IRS, that the Corporation, LLC, Partnership or Sole Proprietorship has obtained an EIN number and that it matches the one provided in the application.