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Current Account Fraud Increasing

11th June 2012

Experian, which manages fraud protection systems for UK banks and insurers, has revealed that fraud rates are on the increase for bank current accounts and general insurance applications. The close monitoring of this issue, and the use of the strong term “fraud”, stands as a warning to anyone seeking to misrepresent their circumstances to a bank or insurer. What may seem like a “little white lie” may be viewed as something much more significant by a concerned financial institution.

Questions regarding bank credit products and insurance policy applications are common on our trust deed Scotland forums. Some forum posters are naturally concerned about an extended exclusion from the best value financial services which may continue even after their debts have been dealt with. Debt solutions such as Scottish trust deeds or the Debt Arrangement Scheme have significant implications for a credit rating, implications which may then restrict access to some financial and insurance products.

We’re often asked in the trust deed forum whether a “normal” bank account can be obtained after a trust deed finishes. This generally means the type of bank account that comes with an overdraft facility and perhaps an offer of a credit card as well.

Experian are suggesting that 44 out of 10,000 current account applications are fraudulent and that the fraud often involves financially stressed individuals failing to reveal poor credit histories when opening an account or asking for an overdraft. Some people may be shocked to see this described as being fraud, but great care is obviously needed to be transparent with applications to financial services providers after completing a protected trust deed.

40% of current account fraud is reported to be the type of issue where someone seeks to make a payment from an account that they know they lack sufficient funds to pay. This may also come as a shock to some people that might consider this to be “unfortunate” or “unavoidable” rather than “fraudulent”. This type of issue can easily arise when individuals are caught in a downward spiral of debt prior to commencing with trust deed Scotland or debt arrangement scheme services. The increasing use of payday loans only magnifies the potential for this type of problem to occur.

Experian also report that many financially stressed people misrepresent their personal information when applying for insurance, and this this type of fraud is also increasing. Formal debt solutions (especially insolvencies such as bankruptcy/sequestration or protected trust deeds) often need to be disclosed to insurers as part of an application or renewal. Failing to do so can lead to claims being rejected as well as possible allegations of fraud.

It may seem wise to leave out some information on a new bank account application, unfortunate if payments fail to a new credit source that you could never have truly expected to be able to repay, or savvy not mention a Scottish trust deed when applying for insurance. UK banks and insurers seem to view this very differently, as being various types of fraud, and they are therefore prepared to invest in Experian’s “National Hunter” and “Insurance Hunter” systems to confirm that their clients’ applications and actions are transparent and complete.

Would you be prosecuted for fraud if an application you may was considered to be deliberately incomplete or untruthful? The evidence is that relatively few people are, and that such legal action is typically reserved for the most serious attempts at fraud. Would a less serious detected transgression result in you being “flagged up” on fraud detection systems such as “National Hunter” and “Insurance Hunter” when making future applications to other lenders and insurers? We don’t know, but we suspect that the answer would be yes.

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Wylie & Bisset Grant Thornton

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