Fraud, credit and identity risk: What to watch for in 2019

by Ken Meiser

Ken Meiser

What does 2019 have in store for those of us who work in the fields of fraud, credit and identity risk? These are some of the key issues ID Analytics will be following and actively working to address.

Consumer Privacy

This is going to be the issue to watch, particularly over the next two years. I recently wrote about the passage of the California Consumer Privacy Act (CCPA) and both its potential consumer benefits as well as unintended consequences. Before the CCPA is officially adopted in 2020, work will need to be done to clarify some of its requirements from an industry perspective and address aspects of the law consumers believe don’t go far enough to protect their personal information.

California’s passing of a consumer privacy law is already driving the introduction of similar legislation in other states. There’s also some congressional interest in national privacy legislation, and one of the major points of debate will likely be around state-by state approaches versus a national, uniform standard. Additionally, trade groups and privacy advocates are lining up to debate the best course of action for new standards and stronger enforcement and how a national law will impact efforts on a local level.

One example of proposed national privacy legislation is the Data Care Act of 2018 that was introduced in the Senate in December of 2018. It is designed to protect consumers’ information online, penalize companies for not protecting personal data and protect that data from being sold or shared without consent. This is merely one of many federal initiatives that have been recommended with the intent to protect consumer information and is certainly not going to be the last.

Where our country lands on a national privacy law remains to be seen. As businesses attempt to navigate the European Union’s General Data Protection Regulation (GDPR), the CCPA and myriad other state and/or federal laws that may arise, the feasibility of complying with multiple regulations that have potentially conflicting requirements will be brought into question.

Today this is a relatively bipartisan issue that will seek a solution that protects consumers and eases the compliance burden on businesses. As this issue gains attention, we can expect to see lively commentary on proposed legislation and whether it is too strict or too soft on the journey to get it just right.

Synthetic identity fraud

Last year legislation was introduced with the intent to reduce identity fraud. As a recap, the Economic Growth, Regulatory Relief, and Consumer Protection Act was signed in May of 2018, and contains a provision that directs the Social Security Administration (SSA) to make a mechanism available to facilitate the verification of consumer information upon request by a certified financial institution electronically. This is a practical method of identity verification against the issuing source and should help significantly.

While the regulation has the long-term potential to significantly reduce synthetic identity fraud, 2019 may be the year when the legislation is adjusted to allow telecommunications providers, fintech companies and nonbank lenders access to the service.

The SSA is currently working with an established coalition of stakeholders to determine the most appropriate way to implement the rules and develop the service and keep it moving forward in a manner that will have the strongest impact on fighting synthetic identity fraud.

Digital verification will be a powerful tool, particularly if eligibility is expanded to other critical use cases and enterprises. I remain convinced that strong behavioral analytics and shared signals within ID Analytics’ ID Network®, one of the nation’s largest networks of cross-industry consumer behavioral data, are essential tools to detect fraud and criminal behavior. Gaining cost efficiencies, concerns over the user experience and the dynamic evolution of synthetic behaviors all point to a long-term need for enterprises to pair government verification with predictive assessments of synthetic risk.

In October of 2018, we introduced two solutions to address the complexities of synthetic identities by focusing on the root cause – identity legitimacy and the impact of synthetics from both a credit and fraud risk perspective. Expanding the role government plays in helping with identity verification is important. However, it will likely take broad, universal protections through new legislation combined with cross-industry collaboration to detect latent synthetic fraud and prevent new synthetic account openings.

Underwriting during hard business cycles

It has been more than a decade since the Great Recession and many economists are forecasting the next recession will hit by 2020. In anticipation of the market moving into a hard business cycle, lenders will likely tighten their lending standards to ensure they are making the right decisions about consumer credit and fraud risk.

In addition to more closely managing risk during account opening, it will be important for lenders to more closely monitor their current accounts. Portfolio management services and predictive analytics that help enterprises identify consumers who are likely to default on a payment give lenders an opportunity to intervene early to adjust terms, work with the consumer to avoid default, or manage collections in a timely manner.

We are likely to see a ripple effect from tighter lending standards, meaning limited access to credit for some consumers. This may be the ideal time for lenders to consider alternative data and modern modeling techniques to help them be less restrictive and more competitive with offers. ID Analytics’ original research demonstrates the value of using alternative credit data to help lenders find opportunities with consumers who may be overlooked or undervalued by traditional credit scores and identify more precise loan terms relative to risk.

I will keep you informed throughout the year of new developments in these areas. If you are interested in receiving monthly updates, sign up for our newsletter below.


Ken Meiser is Chief Compliance Officer at ID Analytics