Detecting First-Party Fraud: Strategies and Challenges

Detecting first-party fraud poses unique challenges because fraudsters are often using legitimate information. Data plays a critical role in spotting fraud by pointing out patterns such as high charge-off balances that hint at fraud, said Matt Beardsley, senior manager of consumer lending, high-risk underwriting and high-risk mitigation at PenFed Credit Union.

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“First-party fraud is often premeditated, making it crucial for lenders to scrutinize loans with high charge-off percentages for potential fraud,” Beardsley said. Rigorous employment verification can help mitigate risks at the onboarding phase.

The job of identifying fraud is getting harder, Beardsley said, because credit repair companies are helping borrowers create clean credit records to evade detection. “Credit repair is the piece that allows first-party fraud to exist,” he said, adding that these services are helping first-party fraudsters repeatedly commit crimes.

In this video interview with Information Security Media Group, Beardsley discussed:

• The role of link analysis in spotting fraud;
• How credit repair companies are helping people commit fraud;
• Strategies for defending against first-party fraud.

Beardsley joined PenFed in 2001. Prior to his current role, he served in the financial crimes unit for five years and investigated a wide range of fraud and testified in cases brought by the FBI, U.S. Secret Service and U.S. Postal Inspectors. He has also organized and taught fraud awareness training for internal teams.