Business Day

Bureaus play pivotal role in fraud prevention

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With the increasing prevalence and frequency of cybercrime­s such as phishing, spoofing and data breaches, which compromise the personal identity informatio­n of individual­s, the risk of identity theft and its use in credit applicatio­n fraud has never been greater.

Statistics released in 2017 by the South African Fraud Prevention Service indicate that identity theft has increased by 200% over the past six years, while the most recent statistics available from the South African Banking Risk Informatio­n Centre show that credit card fraud increased by 13%, from R331.4m in 2015 to R375.4m in 2016.

People tend to only find out that they’ve become victims of identity theft or credit applicatio­n fraud when a credit provider or debt collector calls them about an overdue account or outstandin­g debt.

In this regard, credit bureaus fulfil an important role as they have the systems to verify credit card usage, identify highrisk transactio­ns and protect against credit applicatio­n fraud. Frank Lenisa, director at local credit bureau Compuscan, says in an environmen­t where it’s difficult to know who to trust, credit bureaus provide an objective measure of the facts.

“This allows credit providers to verify identities and notify consumers when new accounts are opened in their names.”

Lenisa suggests consumers check their credit reports regularly, not just to review and manage their creditwort­hiness, but also to protect themselves.

Informatio­n contained in a credit report that should raise alarm bells includes irregular searches made for credit applicatio­ns, incorrect or altered personal details, or additional loans, credit cards or accounts that were not initiated by the consumer.

Credit bureaus also assist retailers and lenders in mitigating these risks by preventing credit applicatio­n fraud through systems that highlight, in real time, possible difference­s in consumer informatio­n provided on an applicatio­n. This helps to avoid and reduce fraud charge-offs and the potential for losses, as vendors that do not have the capabiliti­es in place to reduce or mitigate applicatio­n fraud can be held liable for reimbursin­g the funds lost and the associated costs.

According to Frank Knight, CEO of credit management specialist DebtSource, the issue of applicatio­n fraud is just as prevalent in the business-tobusiness credit sector.

“Three years ago we experience­d a fraud rate of one in 2,000 trade credit applicatio­ns, but today that is closer to one in 400.”

Knight says commercial identity theft and the creation of fake businesses have become prevalent forms of commercial fraud. “Businesses of all sizes require the capabiliti­es to assess trade credit applicatio­ns based on financial and other company informatio­n to properly vet potential partners and customers, and make appropriat­e limit decisions.”

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