The True Identities Behind First-Party Fraud

John Smith opens a new credit card account, immediately maxes out his credit line, defaults and disappears without a trace. His account is eventually written off by the issuer as a loss. In this scenario Mr. Smith used his own credentials, with minor variations in his contact data, to deliberately defraud the credit card company.

An unsuspecting consumer is approached by a representative of a “secret shopping” service and offered an opportunity to make quick cash by signing up for multiple contracts for iPhones. The individual is compensated for the phones they obtain and told that the service contracts will be cancelled. Months later the consumer is facing mounting overdue bills for the new accounts and phones while the fraudster has already resold the phone for hundreds of dollars.1

These are examples of first-party fraud and it can be easily missed by the traditional fraud detection methods used at many institutions because the individuals applying for credit, purchasing a product, or signing a contract are using their real identities.
 

Identifying “Mules” Before They Come Back to Bite You

Often referred to as “credit muling” or “equipment gaming,” first-party fraud occurs when consumers use their true identities and personal information to apply for multiple, high-value products with no intention of honoring their contractual agreements.2

When consumers set out to steal from a business using their real identities, running a standard credit check – or even a third-party fraud screen – won’t necessarily protect the credit issuer. These “mules” have different profiles from identity fraudsters, so they require a specialized approach using fraud assessment tools and predictive solutions.

Consumer behavioral data from the ID Network incorporates insights from wireless, retail lending, banking, peer-to-peer lending, and checking and savings accounts. By using these insights to form a historical picture of how a consumer typically behaves, ID Analytics can quickly identify when an individual begins to seek credit and services in an unusual and high risk fashion.
 

An In-Depth Analysis of First-Party Fraud

By rank-ordering the risk associated with consumer identity elements being asserted on an application, ID Analytics provides a first-party fraud risk assessment across all channels. Higher risk applications are flagged for remediation while lower-scoring applications may move on to the next step of the purchase process. Organizations choose the score threshold that best balances fraud prevention with fast, convenient adjudication processes.

Businesses need first-party fraud solutions that can:

  • Identify and analyze the special attributes of “mules” across industries
  • Minimize the manual review of legitimate, well-intentioned customers
  • Help reduce first-party fraud losses with a near real-time fraud assessment purpose-built for this unique challenge

 
 

1. Jojola, Jeremy. KUSA. (24 April 2014) Caught on camera: 9Wants to Know exposes ‘iScheme’ retrieved April 14, 2015 from: http://www.9news.com/news/investigations/caught-on-camera-9wants-to-know-exposes-ischeme/249748824

2. Tressler, Colleen. Whoa there! Watch out for cell phone ‘credit muling’. FTC Consumer Information. (11 June 2014) https://www.consumer.ftc.gov/blog/whoa-there-watch-out-cell-phone-credit-muling