Saturday, June 25, 2016

Payday loan scams in financial institution

Definition of payday loan scams:


payday loan fraud


Payday loan scams is a multifaceted activity that includes several types of criminal activities by bank frauds examples. Larger payday loan scams schemes often involve real estate lending and collusion between insiders and outsiders. Payday loan fraud represents the highest risk area for financial institutions. Although the number of occurrences might be small, the dollar amount per occurrence tends to be large.

 

Common payday loan fraud and payday loan scams Schemes:


1- Payday loan scams by creating Loans to Nonexistent Borrowers:

False applications, perhaps with inaccurate financial statements, are knowingly or unknowingly accepted by loan officers as the basis for loans. These types of payday loan scams can be perpetrated by people either external to the lending institution (external fraud) or by officers, directors, or employees of the victim institution (internal fraud).


2- Sham payday loan fraud with Kickbacks and Diversion:

Loan officers will sometimes make loans to accomplices, who then share all or part of the proceeds with the lending officer. In some instances, payday loan scams is occurred by charging the loans off as bad debts; in other instances, the bogus loans are paid off with the proceeds of new fraudulent loans (payday loan fraud).


3- Double-Pledging Collateral:

Another example of payday loan scams and bank frauds examples is occurred when borrowers pledge the same collateral with different lenders before liens are recorded and without telling the lenders.


4- Payday loan scams with Reciprocal Loan Arrangements:

Insiders in different banks cause their banks to lend funds or sell loans to other banks with agreements to buy their loans, all for the purpose of concealing loans and sales.


5- Payday loan scams using Swapping Bad Loans - Daisy Chains

In a daisy chain, a bank buys, sells, and swaps its bad loans for the bad loans of another bank, creating new documentation in the process. The purpose payday loan scams is to mask or hide bad loans by making them look like they are recent and good.


 6- Payday loan scams by Linked Financing:

Large deposits (usually brokered deposits) are offered to a bank on the condition that loans are made to particular individuals affiliated with the deposit broker. High returns are promised, but the loans are of a longer term than the deposits (hot money). Sometimes payday loan scams is clear when kickbacks are paid to the broker or banker.


7- Payday loan scams by False Applications with False Credit Information;

Sometimes loan applicants provide false information about their credit situation and/or overstate their assets.


8- Credit Data Blocking:

In some countries, financial institutions largely rely on credit reports to determine whether to extend credit to customers. Fraudsters in payday loan scams might attempt to manipulate these reports in order to receive loans that they otherwise could not. In a credit data blocking scheme of payday loan fraud, the perpetrator first applies for and obtains loans for property, vehicles, etc., but intentionally defaults on them. Rather than allowing his credit report to reflect the defaulted loans, the perpetrator asserts that the initial loans were instances of identity theft. While the validity of the payday loan fraud claims are being checked, the perpetrator’s negative credit history is temporarily removed from his credit report. This payday loan scams allows the perpetrator to take out more loans, which he will also intentionally default on.


9- Single-Family Housing payday loan fraud:

In this scheme of payday loan scams, unqualified borrowers misrepresent personal creditworthiness, overstate ability to pay, and misrepresent characteristics of the housing unit. Such acts might include reporting inflated income, moving debt into a dependent’s name, reporting inflated square footage of the collateral, or even bribing an appraiser to value the home at a higher amount than the market value.


10- Construction Loans:

Construction lending has different vulnerabilities than other permanent or interim lending.
More risks about bank frauds examples are associated with construction projects than with already-built projects. Construction bank frauds examples are numerous; the more common payday loan fraud is related to estimates of costs to complete, developer overhead, draw requests, and retainage/holdback schemes.

Abdo Mounir

About Abdo Mounir -

Senior Manager and fraud examiner in mining industry. Head the investigations related to fraud. My role includes driving the culture of integrity And ethics within the Company by conducting regular fraud investigations.

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