Economic Headwinds: Navigating Identity Fraud in 2024
In Q4 2023, identity fraud accounted for 75.21% of all fraud, representing the largest proportion of all fraudulent applications, according to Equifax Canada’s recent Fraud Trends report. Since the pandemic, identity fraud has been growing and becoming more targeted; attacks can be focused on a particular lender, province, or credit product. Below are some key outlooks and potential drivers of fraud for 2024 that businesses should watch for to help protect themselves and their customers.
The Impact of Affordability on Fraud
Elevated inflation coupled with high interest rates have slowed down credit demand and are impacting consumer affordability across the board. This low affordability environment may lead to more first-party fraud—and identity fraud—in 2024.
Identity fraud is most common in unsecured lending like credit cards and bank deposits. It's not surprising then that the biggest proportion of identity fraud was seen in the banking sector, where 73.5% of all fraudulent credit card applications and 89.3% of all bank deposit frauds in Q4 2023 were found to be as a result of identity fraud. Staying informed and understanding how these trends can impact your clients is the best safeguard to stay ahead of fraudsters.
Upcoming Mortgage Renewals and Falsified Financials
Equifax Canada reports as well that fraud rates in mortgage applications are continuing to rise. In fact, the mortgage fraud rate increased by a steep 9.9% in Q4 2023 as compared to Q4 2022, the highest it has been since 2019. Worryingly, the majority of mortgages opened in 2019 and 2020 are coming up for renewal in the next 12 to 24 months. Mortgagors will need to re-qualify, likely at higher interest rates, putting more financial pressure on these individuals.
Fraud within the mortgage market is mostly first-party fraud where consumers provide false information to qualify for a mortgage. We could see a spike in falsified financials and income information as consumers try to qualify to get the best rates.
Identity Fraud within the Auto Industry
Identity fraud is also becoming more common in secured lending, resulting in a significant rise in this type of fraud in auto loan applications. According to Equifax Canada, the proportion of identity fraud has doubled in the total amount of fraudulent auto applications since 2019. While 79.8% of auto fraud remains first-party fraud (with common tactics like falsifying financials or providing false income statements to lenders), identity fraud in secured lending is showing a worrisome growth trend.
Lenders should be identifying inconsistencies in applications, implementing robust identity proofing processes, and validating income and employment records. These strategies can help lenders gain a holistic view of their consumers’ credit health and profile which can aid in protecting against fraud-related losses.
Read more on how to identify and protect your business from different types of fraud. If you're interested in helping safeguard your business against identity fraud within the mortgage or auto industry, learn more about Equifax Canada’s FraudIQ Manager™.
If you want to learn more about how Equifax Canada can help support your fraud prevention efforts, please contact your Equifax Account Representative. You can also reach us directly at 1-855-233-9226 and follow us on Twitter and LinkedIn.
This article is published by Equifax Canada Co.® 2024. All rights reserved. No part of this article may be reproduced, copied or transmitted in any form or by any means, or stored in a retrieval system of any nature, without the prior permission of Equifax Canada Co. This article is for informational purposes only and is not intended to be legal or business advice.
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