05 Sep Bust Out Fraud

In the world of cyber crime new threats seem to emerge all the time. For many of us, we hear the news reports on the latest data breach to a business and the number of people who were affected and then quickly run to a computer to find out if you were one of those people. With the rising number of data breaches, we (as a society), have become wired to respond to those 2 words, but there are other kinds of fraud that are just as alarming but not as widely heard about such as bust out fraud.

Bust Out Fraud, or otherwise known as “sleeper fraud,” affect many businesses and financial institutions. This occurs when a person applies for a line of credit or takes advantage of a promotion to defer payments with no intentions of paying for the product or service. They may use valid information such as their actual name and date of birth but will provide some fraudulent information such as a fake address and phone number. The perpetrator will then max out the line of credit or promotion and then will eventually disappear, leaving the lender assuming 100 percent of the risk. This is a common practice used in loan stacking.

Although the potential for Bust Out Fraud is possible any business that deals with credit lines and financing, there are things you can do reduce your business’s risk.

1. Require additional identifiable information and submit information for further review before issuing to new customers. Getting to know your customers not only helps you to determine if there are “red flags,” it also allows you to build a rapport with them. Although this can be tedious, addition checks such as reference checks and acknowledging credit behavior patterns can deter potential fraudsters from targeting your company.
2. Reduce the number of manual applications and processes to reduce potential errors. Written financial applications poses many errors for the business and it exposes the customer’s information to becoming compromised. By having the customer input their information into a digital application that can be run through multiple programs and review processing companies, such as NO Fraud and Cardinal Commerce, simultaneously reduces the amount of error and exposure.
3. Update common business practices regularly. As the dynamic of your business changes, staying informed on new technology and best business practices are paramount in assisting you. It’s always a good idea to stay informed so that when making decisions, you can feel confident you made the best decision.

Resources

20 Types of Identity Theft and Fraud

Bust Out Fraud Score