Failing to Drop the Other Shoe
A recently released study about identity manipulation has been picked up by the mainstream media and is making its way around the internet. But before we talk about the study, a little context.
Near the end of “The American President,” Michael Douglas gives a speech. It’s the point in any movie where the main character attempts to correct the character flaws that the director and writers spend most of the movie highlighting. In talking about a possible opponent in an upcoming presidential election, Douglas offers insight into how politicians win elections. He says his opponent, played by Richard Dreyfuss, is interested in only two things: making Americans afraid of something and then telling them who to blame for it.
It is in this context that I wish to discuss the aforementioned study. The study reveals that one in 15 Americans have lied on a credit application — such as a credit card or auto loan — by using a different Social Security number or birthdate or by commingling information with a spouse.
People lie. Everyone knows that. Nobody should be shocked that people lie to obtain credit. The recession has hammered credit scores and sometimes people resort to desperate measures. And other people commit fraud with the intent of trying to make money.
The study only tells half the story. ID Analytics, the company that released the study, is making lenders afraid of fraud. But what the study does not reveal is the extent to which people who are using fraudulent data on credit applications are successful. That is the most important number.
In an article on MSNBC.com, the chief technology officer for ID Analytics admits that most of these fraudulent applications are caught before they are approved, “but enough of them get through that people keep trying it.”
It doesn’t really matter how many people use fraudulent information to apply for credit. What matters is how many get away with it. This is like saying that one in 15 married individuals have flirted with someone other than their spouse. The more important number is how many of those people actually cheat on their husbands or wives.
Lenders know that people lie. That’s why applications go through an underwriting process prior to making a decision to fund a loan. That’s how most of those fraudulent applications are caught.
People lie. People cheat. People steal. What matters, at the end of the day, is how many get away with it.
