Lending Fraud Glossary

From first-party fraud to zombie debt reassignment, Point Predictive has compiled definitions for many common terms related to lending fraud.

Artificial paydown: A type of first-party fraud wherein borrowers use bad checks to pay down or pay off the loan. The aim is to sell or trade in the car for profit before the check bounces, deceiving both the bank and the dealer into believing the loan has been satisfied and releasing the lien against the car.

Auto dealer fraud: This occurs when a dealer misrepresents borrower data to lenders in an attempt to sell more cars. Types of this fraud include powerbooking, fake dealerships, and ghost down payments, among others. Learn more on our blog: Cracking Down on Auto Dealer Fraud and Misrepresentation.

Bust-out fraud (a.k.a. Loan stacking): A type of first-party fraud wherein synthetic identities are used to apply for multiple loans simultaneously.

Collateral fraud: A type of first-party fraud wherein the borrower manipulates the value of collateral associated with a loan.

Credit washing: A type of first-party fraud wherein all negative tradelines are systematically disputed on a credit report by filing a false affidavit with the FTC and using it to dispute all negative tradelines on the grounds of identity theft. Learn more on our blog: Mortgage Lenders Should Be Aware of Risky Credit Repair Activity That Is Often Hidden From View.

Criminal synthetics: A type of synthetic identity fraud wherein identities are created to accumulate credit and intentionally default (bust out). Often targeting prime credit lenders, they appear ideal but inconsistencies are revealed upon scrutiny of their credit history. Learn more on our blog: The 5 Categories of Synthetic Identity Fraud Reveal Different Motivations.

Employment misrepresentation/ fraud: A type of first-party fraud wherein borrowers falsify their employment status, which can range from an unemployed individual claiming employment to self-employed borrowers presenting themselves as W-2 earners, and even extends to the use of entirely fake employers. Many involved in this type of fraud are coached by unscrupulous credit repair industry representatives, which can provide verification of employment (VOE) services. Learn more on our blog: Synthetic Fraudsters Not Only Use Fake Identities But Fake Employers as Well.

Employer recycling: A type of dealer fraud where dealership employees reuse phone numbers or employer information on lending applications to remain competitive internally.  Learn more on our blog: Recycling Employers on Applications Can Point to Systematic Fraud.

Fake employer: A catch-all term for employer names and details that have been knowingly misrepresented or inaccurately provided to submit a fraudulent loan application. Learn more on our blog: This Skyrocketing Type of Auto Loan Fraud is Flying Under-the-Radar.

Fake tradelines: Tradelines are credit accounts listed on a credit report. Borrowers create fake (or manufactured) tradelines using obscure companies with large credit limits, low balances, and/or perfect payment histories. This practice falsely inflates credit scores and can circumvent lenders’ fraud checks and assessments. Learn more on our blog: How Fake Tradelines Are Boosting Credit of Some Borrowers.

First-party fraud: When an individual or organization purposely misrepresents their identity or provides incorrect information (e.g., on a loan application). Learn more on our blog: Understanding the Many Faces of First-Party Fraud. 

Forged documentation: Forgery of pay stubs, bank statements, driver’s licenses, utility bills, and other supporting documentation. Learn more on our blog: Fake Pay Stubs: Easy to make; cost lenders millions.

Fraud as a service: A service offering to commit fraud for consumers so they don’t have to get their hands dirty.

Frequent fraudster: Recurring fraudsters that hit lender after lender with different identity attributes.

Ghost down payments: A type of auto dealer fraud where the artificially inflated purchase price of a vehicle is offset by a nonexistent down payment that the borrower has reportedly placed on the vehicle to secure financing. Learn more on our blog: Cracking Down on Auto Dealer Fraud and Misrepresentation.

Income misrepresentation/ fraud: A type of first-party fraud wherein an applicant inflates their income to qualify for a loan. Learn more on our blog: Technology is Changing How Lenders Look at Loan Applicant Income.

Performing synthetics: A type of synthetic identity fraud wherein identities are created to obtain credit without intending to bust out. Though often repaying loans, they can still lead to charged-off debts. Found frequently among new immigrants or those with poor credit in the subprime market. Learn more on our blog: The 5 Categories of Synthetic Identity Fraud Reveal Different Motivations. 

PII (Personally Identifiable Information): Information such as Social Security Numbers (SSNs).

Powerbooking: A type of auto dealer fraud wherein a vehicle’s selling price is artificially inflated to secure a larger loan from the finance company.

Shell persons: A type of synthetic identity fraud that is similar to shell corporations in that the synthetics circumvent government sanction lists to enable covert operations for bad actors. Created to disguise fraudulent activities under a guise of legitimacy. Learn more on our blog: The 5 Categories of Synthetic Identity Fraud Reveal Different Motivations. 

Staging synthetics: A type of synthetic identity fraud that is the initial phase of Criminal Synthetics, known as “credit gestation,” where identities establish credit legitimacy. While they may perform credit obligations initially, they eventually progress to fraudulent activities. Learn more on our blog: The 5 Categories of Synthetic Identity Fraud Reveal Different Motivations. 

Straw borrower: An individual whose name, Social Security number, and credit history are used to hide the identity of the actual borrower. Learn more on our blog: Straw Borrower Fraud Outwitted by FraudBot.

Synthetic identity [fraud]: An identity created from a combination of fabricated, stolen, and/or real credentials where the implied identity is not associated with any real person. Learn more on our blog: How to Spot 5 Red Flags That Appear on Most Synthetic Identities.

Synthetic mules: A type of synthetic identity fraud that is designed not to cause immediate loss but to facilitate moving illicit funds after a bust-out. Fraudsters establish deposit accounts for laundering proceeds, aiding in remaining undetected. Learn more on our blog: The 5 Categories of Synthetic Identity Fraud Reveal Different Motivations.

True name identity theft: Identity fraud that occurs when someone uses another person’s actual identifying information.

Zombie debt reassignment: Bad debt that has met the statute of limitations for collections but is then bought and used by unscrupulous credit repair agencies to artificially boost their customers’ credit scores by reassigning the debt to their customers and reporting it as paid. Learn more on our blog: Zombie Debt Reassignment: A Scary New Reality for Dealerships and Lenders.