To The Point Podcast Episode 6: The State of the Fraud Prevention Field with Matt Beardsley
On this week’s episode, Matt Beardsley of PenFed Credit Union explains how first-party loan fraud is an understated and too often overlooked financial crime. He discusses the evolving tactics fraudsters are using to deceive credit unions and other lenders, and the steps organizations like his are taking to stay vigilant.
Beardsley, a self-described “financial crimes nerd,” also delves into what he finds challenging and compelling about his line of work.
Click below to listen to the full episode or read the full transcript.
This is To the Point, a podcast from Point Predictive.
This is Jeff Goldberg at the 2023 Auto Lending Fraud Roundtable presented by Point Predictive. I’m here with Matt Beardsley from PenFed. Matt, before we get going, you said, I am a self described nerd when it comes to this kind of stuff. Is that correct?
That is correct. I’ve been I’ve been a financial crimes nerd for 15 years. And so I worked in financial crimes at PenFed. The role I’m in today is on the underwriting side. But fraud is something I’ve always been fascinated with. For some reasons, it comes quick or my, you know, sort of abilities to really understand how it operates. You know, how do we measure the risk? How do we know if it’s fraud, anything under the header of bank fraud has been something that I’ve also had a lot of exposure in my financial crimes role. And that’s what, as I mentioned earlier, during the conference, the loan fraud was the piece where I think we were more vulnerable than, say, deposit fraud, you know. And so I wanted to create a team where we could underwrite consumer loans, but really with a motivation or concentration to mitigate all forms of loan fraud, be it you know, first party, third party, you know, your ID theft, or synthetic identity fraud.
And I think the momentum is shifting to first party. And a lot of those loans that default, are not getting looked at by the fraud teams, because there’s no victim in essence. So whereas with identity theft, and a lot of the solutions that are out there, to sort of identify and measure cases of true ID theft, I think the challenge right now that we’re, that I see is attempting to measure the risk of first party fraud knowing that credit repair and efforts to fix somebody’s credit after the fact, are readily available. And so it’s been a tricky endeavor to look for anything that looks amiss, when you have somebody that’s colluding, and they’re using their own credit profile, they’re using their own phone number, email, all the data points, and attributes that we use to measure. They don’t work as they do with third party ID theft cases.
So it’s only getting tougher, the criminals are leveraging technology, arguably, they’re getting smarter, more savvy. So how do you do it? How do you combat it?
Yeah, it’s always this constant game of sort of cat and mouse. And as I mentioned earlier, and it’s always it’s evolving. And at times, we’ll go back and use, you know, methods years ago that were invoked that sort of, you know, they moved on to something different, and then they’ll employ that old way of doing business.
So, and again, the fraudsters don’t necessarily all operate together in you know, in concert with each other. We’ve got folks in different parts of the country sort of doing certain types of fraud. But it’s a big challenge. And I think the ability to recruit those into this into fraud, you know, maybe 10 years ago wasn’t, it was harder to do, or, you know, some of the social platforms, social media platforms to go out and recruit people that can perform the fraud. Meaning the fraudsters, just the one in the shadows, we don’t really know who they are.
And so, it’s always a challenge, but I’m very much looking to find the patterns, commonalities. And that’s where, you know, like, like I said, with, let’s say, first party fraud, we have a collusive borrower, you need to do like autopsy work in collections, looking at your charged off loans and find out, you know, especially those that were like an installment loan, like a personal loan, car loan, you know. If you’re charging off 90% of the loan balance, then what happened or, you know, did they have any real intentions of repayment. So a lot can be learned by looking at those loans that were charged off, looking at the credit reports that were pulled after the fact because a lot of the loan fraud that exists today, they’re the folks engaging are doing credit bust outs where they’re taking out lots of credit all in a very short period of time. And they’ll keep getting credit, so long for that first couple of loans that they acquired initially, once they start showing on the credit report. Well, their abilities to obtain more loans will be more difficult, but we see sort of a shotgunning of applications with various lenders. We see it specifically with autos, we see it in combination with credit cards, personal loans, other consumer loan products.
But it’s a real challenge and there’s not always a lot of hints. I’ve got some thoughts on ways that sort of looking holistically a word. It’s tossed around a lot, where, you know, we’re leaning on the credit report and their debt to income and their employment to sort of vouch to see if this borrower will be will be able to repay. But I think there’s some other opportunities that exist, knowing that, again, credit repair is widely available, and/or synthetic fraud. So I got some ideas, I’ll float to Frank. But I’m curious to get his take on it. But-
You even use astrology from time to time is that right? Zodiacs?
Yeah, well, I remember years ago, in financial crimes, you know, I would get a referral from somebody in operations that, you know, they thought it was a case of identity theft, or whether it was, you know, an application for a credit card, or usually the consumer loan product. And so I would call the, well, you don’t have to always look for a good phone number to the possible victim. If you think if the lead that they’re presenting you with is likely a case of identity theft, and maybe because the address doesn’t match, or there was something that the somebody the operations noticed.
But if you can find a good number to the possible victim, great, but in cases where that’s not always the case, I would say call the number on the application, because there’s ways that you might be able to trip up the fraudster. And so in the example I gave, you know, I would call, I would, even though I was working in financial crimes, but I made myself sound like I was an operations, I spent years in operations. So I would ask a few questions. And then mentioned to the caller, hey, if you don’t mind, I, it’s asking me to ask you some authentication questions. And I would I would mention it that way. So that the caller wouldn’t think that I was just asking these, you know, questions that are, you know, off the beaten path. So I’ll ask them, you know, real quickly, do you mind sharing me, you know, based on your birthdate? What’s, what’s your zodiac sign?
And because, again, knowing that the fraudsters, they knew where they’re stealing identities, they know what’s on the credit report, or they know they have good credit. So I think some old conventional ways of authenticating questions using questions that were tethered to the credit report, I would argue, is not, you know, best in class procedure. But if you if you’ve got somebody on the line that can answer the zodiac; again, I’m not saying you have to believe in it or anything, but it’s one of those questions that you should get an immediate response. So if they would pause-
Everybody knows their sign.
Yeah, exactly. So, you know, if they would pause or say, oh, you know, they would say, ‘well can you repeat the question again’, I couldn’t hear you, right. And I can tell if they were stalling for time checking on their phone or something. But that was a quick way, or they would just hang up or something. But oftentimes, that was, that was almost enough evidence to buy time to either get a hold of the true victim. And or, you know, withdraw the the application for credit, you know, so we wouldn’t take a loss. So yeah, that seems to work like a charm.
Whatever it takes. You and I were talking and you were saying this during your presentation that you and Frank McKenna from Point Predictive, you guys can talk for hours on end. How has the collaboration with Frank been very productive and very effective for you?
Yeah, so Frank, and I certainly share a lot of, I mean, we’re fraud nerds in the way of, you know, we can share stories or I think the things that I think are very interesting, you know, I talk about what I do for my day job, but to others, sometimes it gets lost in the weeds, you know, there’s sometimes the interpretation barrier or understanding. Whereas with Frank, I mean, we’re fluent. We talk the same language.
And so if I come across something, you know, Frank’s a great person, because not only is he interested in what I’m sharing, but he’ll he’ll provide thoughts or he’ll ask follow up questions, it really shows, I think it’s a good, you know, relationship, when you have this, you know, you could have someone when they’re expressing the same interest. And so, you know, whether it’s the fraudulent data furnishers, you know, synthetic identities, these phantom model loans, or anything else that falls under sort of loan fraud, attributes or themes. He’s, you know, always excited to listen and share stories, he’ll come to me and ask, Hey, have you started? Have you seen such and such? So, you know, I feel like we’re I’m not saying we’re on the cutting edge, but we’re, we’re definitely extremely interested in all things fraud and, really have the energy to want to mitigate it.
Any big takeaways from what you’ve heard today at the Roundtable that has really stuck with you and that when you when you go back home, go back to work, you’re going to apply based on some knowledge you’ve heard today?
Yeah, I would say it’s always nice coming to these events because you get to be around other folks. It’s kind of a, you know, a fraternity if you will. I know we’re, whether it’s lenders that are in the crowd, other fraud investigators or a mix of both. The networking piece is great, but in terms of like the stories and the presentations from today, I think what I would say is I find myself nodding my head to a lot of the, you know, the stories of sharing the challenges that they’re sharing, you know, the consortium. The ability to share information that’s very vital and very necessary for Point Predictive to continue the performance that it needs to have.
And so that that platform and it just the energy in the room, I find that when I, you know, because I’ve been to this conference before, I always leave knowing you feel good about what you’re doing, and you feel like you’re not in a silo because, you know, the finance companies, the banks, you know, they have, you know, teams of fraud leaders, but coming to, you know, a function like this, it’s nice to be able to sit down and talk about things we’re seeing it more than just networking, but looking for ways, creative ways to try to confront this, identify it, measure it. Because more than just having an idea. But you have to be able to package that idea and make it sort of worthy where you can, you can create a solution that’s going to identify some of the stuff.
And so I’ve got some ideas for Frank, that I’ll share with him this evening. But just being in his presence with his team, I feel like these are all the kinds of folks that I would spend my time hanging out with, you know, after work so.
You love this work, you’re like a detective, you really love it.
I’m very passionate very much. That’s why I say, you know, Frank and I seem to be cut from the same cloth, because I think we have the energy, similar energy, get the same satisfaction, and then just sort of want and desire to learn more and keep building. As this stuff doesn’t just sort of stop, it’s always evolving. And so you have to continuously, you know, be around other folks that are in the industry that have sort of the, you know, maybe an inside track on some of this stuff.
And so I feel like that’s the relationship that Frank and I have, and I know that Frank has that with others. That’s really what makes I think Point Predictive so you know, reliable because of the cohesiveness of all the subscribers and those that use their solution. It’s a win for everybody, so.
Well, keep pushing Matt, keep doing that great work. Matt Beardsley with PenFed. Thank you so much for joining us here at the 2023 Auto Lending Fraud Roundtable presented by Point Predictive. Thanks, Matt.
Thanks for having me. Appreciate it.
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