What lenders should watch for to combat credit washing
Head of policy and external affairs at SentiLink shares tips
Lenders must improve their fraud monitoring to keep up with credit washing schemes.
Credit washing is the practice of abusing the Fair Credit Reporting Act laws that are designed to protect consumers from negative and false information on credit reports, according to credit reporting agency Equifax. Fraudsters are taking advantage of these protections and washing negative credit activity from their files.
Jason Kratovil, head of public policy and external affairs at identity and risk solution provider SentiLink, told FinAi News that lenders can look for these red flags:
1. Questionable intent: If a consumer has paid on an account for months, or even years, and then suddenly claims that the entire account is fraudulent, investigation is in order.
2. Collections and judgement records: Look at public records. Just because something might be washed from a credit file doesn’t mean it’s gone.
“Pulling that history back in restores a piece of the picture fraudsters are counting on lenders not seeing,” Kratovil said.
3. Abuse of statutory rights: Statutory rights protect victims by placing alerts on their credit file. However, if those alerts are being requested to be turned on and off often, that should be a red flag.
“It starts to look less like an actual victim and more like a cover,” Kratovil said.
READ MORE: Growing threat of credit washing
AI detection
Along with monitoring for specific activities, lenders can lean on AI for detection.
“AI can help lenders spot patterns across large data sets faster than a human analyst could,” Kratovil said. That detection can flag devices, addresses, behavior and more.
However, it’s a type of fraud that’s tough to find — on purpose, Kratovil said.
“Credit washing is hard to catch because the fraud is invisible by design,” Kratovil said. “A single lender only sees its own book, not the pattern the same fraudster is running across five other institutions at once.”
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