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While first-party loan “white lies” — or more — is not a new concept or challenge for financial institutions (FIs), the way it will manifest in the next 12 months is, according to digital identity specialist GBG’s latest fraud-prevention report.
Macro-economic issues like the rising cost of living, inflation and economic pressures are influencing trends in first-party fraud, it explained, with almost one in five (19 per cent) Australians believing it’s okay to tell a “white lie” and report having less debt than they actually have in a financial service or loan application.
However, despite the growing financial pressures, 89 per cent of Australians said they are unchanged or less likely to omit a debt or liability in a financial service or loan application in the next 12 months. Also, 81 per cent of Australians said they would be “100 per cent accurate” about how much debt they have. Furthermore, 70 per cent said they would never knowingly lie in a financial service or loan application.
The Evolution of First Party Fraud in Australia report — which analysed responses from 1,008 Australians in a survey conducted by Pureprofile in July 2022 — highlighted the way first-party fraud will manifest throughout the next 12 months will be “multi-faceted and complex.”
Clarifying of consequences in the spotlight
“The reality is that the vast majority of Australians will try to do the right thing when it comes to loan applications and managing their finances,” commented GBG regional general manager for Australia and New Zealand, Carol Chris.
“Even during times of financial instability or stress, most Australians will look for legal, simple and cost-effective ways to address their challenges.”
Concerningly, only 22 per cent of respondents were very confident in understanding the rules, legislation and consequences of lying in a financial service or loan application, the report outlined.
“While most Australians seem to be taking responsible steps to be honest in their financial service and loan applications, there are some clear misconceptions around whether it is acceptable to omit seemingly small details in these applications,” Ms Chris said.
“Not to mention there is a lack of community-wide understanding of how dire the consequences can be when these instances of fraud are uncovered.
“There is an opportunity for financial institutions to make information about the rules and regulations of loan applications more accessible for customers to limit the impact of intentional or unintentional first party fraud.”
Other highlights of note:
- Twelve per cent of Australians have knowingly omitted a debt or liability from a loan application in the past.
- The most common reasons cited for omitting a debt or liability from an application were knowing they can afford the repayments (40 per cent), needing the money and feeling they had no other choice (34 per cent), and believing the financial institution was unlikely to find out (31 per cent).
- Almost a third claimed it was not a big deal to lie to FIs if it meant they got the finances they needed (30 per cent), or because they believe nobody gets hurt (30 per cent) in these situations.
- Half (50 per cent) of survey respondents said they would let the relevant business (including mortgage brokers) or a FI know straightaway if they had accidentally lied, or changed their mind about lying, in a financial service or loan application — though 14 per cent said they would take no action at all.
- Amid rising inflation and cost of living, 26 per cent of Australians expect FIs to make it easier to borrow money without having to lie or jump through hoops; 32 per cent want them to provide more free and easily accessible information about how to manage debt and other finances; 35 per cent want FIs to cut fees; and 19 per cent want them to adopt technology solutions to deliver a better customer experience.
- The most common reasons consumers cited for switching banks or FIs were pricing (40 per cent), lost trust due to how they handle fraud and scams (27 per cent), and a faster and easier onboarding process (11 per cent).