Financial fraud in 2017 presents itself in many forms, from synthetic identify theft to kickbacks and skimming. As America settles in with a new year and a new presidential administration, lenders are still looking for answers to loan stacking – a popular type of fraud that doubled in frequency during recent years, according to the Wall Street Journal.
Increasingly, lenders of all sizes are finding hope to curb the issue with an innovative data product from Clarity Services. Temporary Account Record debuted last year to address fraudulent loan stacking, an issue that has shaken confidence and eroded profitability for decades.
The premise is simple but effective. Once a customer is approved for a loan and signs the papers, that loan will appear on his credit report as a temporary tradeline – making it much more difficult for the same customer to secure additional loans with other lenders.
Temporary Account Record works similarly to the process that occurs with credit cards, where the final transaction on a purchase isn’t posted for several days. At the time the purchase is approved, a temporary hold is placed on the credit card for the amount of money that covers the transaction – thereby reducing the available credit balance. A Temporary Account Record, which is typically triggered by a consumer’s e-signature, works the same way.
For example, if a loan is approved at 10 a.m the lender submits a temporary tradeline, which is available for other lenders to view in the Clarity system until it is replaced with a permanent tradeline record.
“Lenders who haven’t closed the reporting gap are sending a dangerous message and setting themselves up for higher rates of default.” – Tim Ranney
Lenders can see other loans and make a determination of whether the consumer can handle the stacked loan. Both lenders win; the lender who submits the temporary tradeline reduces the likelihood that someone else will stack a loan and overextend a consumer after they’ve made a loan. The other lender has visibility into a possible stacking that can indicate a consumer may have difficulty with repayment.
Timely and Effective
Temporary Account Record is proving to be a powerful way to combat loan stacking, which is among a number of fraud trends that have gained traction due to sharp competition among lenders, Internet convenience and pressure for speedy approvals.
“Lenders who haven’t closed the reporting gap are sending a dangerous message and setting themselves up for higher rates of default,” said Tim Ranney, Clarity’s President and CEO. “We are proud to offer the only subprime reporting from any bureau that paints a complete financial picture, showing current loans and pending loan transactions.”
Don’t surrender your profits to loan stacking or other fraud.
Schedule a free consultation by calling Cheryl Brennan at 727-888-5973.