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What is Loan Fraud and How Does it Occur?
With payday loans, you may not know that someone has used your identity to illegally obtain cash. Thieves can open these types of loans in multiple states, racking up a huge debt using your personal information.
How does loan fraud occur?
Many legitimate loaning agencies (think: mortgage, auto, and debt consolidation lenders) only require a small amount of information in their lending application process. This makes it easy for identity thieves to use your stolen information—anything from your Social Security number to your banking information—to get a quick loan. Payday loans make it easy for thieves to obtain cash in your name without much verification. Or worse, with enough stolen details, they could open up a legitimate car, home or business loan.
What are the effects of loan fraud?
Since it is typically easy to get a payday loan, many identity thieves choose to take out the maximum amount for their use—and they could even repeat this offense in multiple states. You may not detect the crime until payday loan collectors are aggressively demanding a payment. A larger loan could have an even greater impact—damaging your credit history and building debt.
The impact:
- At an average of $4,687 in 2011, new loan identity theft cost consumers more than any other identity theft crime. 1
1 Javelin Strategy & Research. “2012 Identity Fraud Report: Social Media and Mobile Forming the New Fraud Frontier.” February 2012.
† Federal Trade Commission. “Consumer Sentinel Network Data Book For January – December 2011.” February 2012.
† Javelin Strategy & Research. "2012 Identity Fraud Report: Social Media and Mobile Forming the New Fraud Frontier." February 2012.
Editorial Disclosure:
This article is designed to educate readers. That means that while LifeLock, which sells identity theft protection services, produced the article, the point is NOT to encourage you to buy LifeLock's products. The point is to inform and educate so that you are empowered to make sound decisions, whether you buy from us, a competitor, or not at all.
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Editor’s note: Our articles provide educational information. LifeLock offerings may not cover or protect against every type of crime, fraud, or threat we write about.
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