Ghost loans haunt bank customers

Data Theft

- Every 2 out of 5 Indians experienced identity theft

- Scamsters make fraudulent use of PAN card details to obtain loans

- If not corrected in time, it has long-term implications

- Credit score is just a 3-digit number between 300 and 900 points

- Any default on a loan severely affects one's credit score

Mumbai: In today's digital world, where information is just a finger touch way, people still check their credit score in only two cases, while applying for a loan or after falling victim to a fraud such as ghost loans or identity theft.

The recent case of Dhani App, wherein Bollywood celebrity Sunny Leone along with hundred others fell victim to identity theft, was one such case wherein scamsters made fraudulent use of PAN card details to obtain loans. Such incidents directly hit victims' credit score and if not corrected in time, it has long-term implications as future lenders continue to see this as an actual default, impacting your future borrowing capabilities.

Even though credit score is just a 3-digit number between 300 and 900 points, any default on a loan severely affects one's credit score in a significant manner. In identity ghost loans or identity theft, a person is not even aware that a loan has been taken on his name. The person generally becomes aware only when the lender starts chasing for repayment or while checking the credit report.

As per the 2021 Norton Cyber Safety Insights Report, every 2 out of 5 Indians experienced identity theft. Nearly 14 per cent of the victims were impacted during 2020 alone, which indicates that almost 27 million Indian adults experienced identity theft in the past 12 months. Despite awareness of credit score, the lack of understanding on credit score is also an equally important issue.

However, digital lending platforms like CASHe and LenDenClub claim to have proper checks in place to avoid such fraudulent practices. Talking to Bizz Buzz, Anurag Sinha, Co-founder & CEO, OneScore & OneCard, a veteran in the consumer credit space, says, "Prevention is better than cure. We have read this statement many times about our health. This is equally applicable to credit health as well. Only way to safeguard against identity theft is to remain aware of what gets included in our credit report." On what needs to be done to avoid such frauds, he said, "You shall check out whether all loans/cards mentioned in report, really belong to you. Secondly, if all loans/card taken by you are reflecting correctly in your report. Thirdly, whether all closures, repayments of your loans/cards are reflecting properly."

Good sign is that more people are becoming aware of this. According to Sinha, "We get more than 20 lakh customers visiting our OneScore app every month, to check their credit reports. Last but not least, it's important to check your credit report as a regular habit, and not just at the time you want to take out a loan."

Leveraging deep technologies like AI & ML have made them understand the pulse of their audience and significantly help personalization of the recommendations rather than simply stating general dos & don'ts. Due to unique and immersive nature of this app, OneScore has been able to receive the trust of 12 million users (app downloads) and 2 million monthly active users, in just two years of its launch.

However, the question arises that how are these loans issued without even applying for them?

In today's digital world, many things have become super simple. Booking a cab, booking movie tickets, taking a loan… everything has become simple. This simplicity has come with its inherent risks as well.

In the earlier world, we had to visit a bank branch or bank will visit us, before taking a loan. In today's digital world, many of these things have been replaced by digital processes which may not be so apparent to customers. Fraudsters sometimes take advantage of such processes and adopt the identity of 'good borrower' and take the loan. This is called 'identity theft' or 'first party fraud'. So, in simple words, Mr X (fraudster) takes over the identity of Mr A (impacted party) without his/her knowledge.

Repayment behavior is the single-most important variable affecting credit scores. As explained above, these are the cases of identity theft and hence, Mr A is not even aware that a loan has been taken in his name. He/she generally becomes aware only when the lender starts chasing for repayment.

Even after the impacted party reaches out to the lender informing about such fraud, the lender will also take some time to decide whether it's really a case of identity fraud or not. And during all such time, non-repayments would have got reported against the impacted party, which would impact credit scores in a significant manner. Credit scores can surely be improved, but there are no short-cuts to it. Only way one can improve one's credit score is by having repayment discipline. In case one's score has got impacted by identity theft, as we discussed earlier, then the only way is to reach out to the lender and lodge a complaint about the same. In parallel, one can reach out to all four credit bureaus and request for removal of account from your report. Credit bureaus then co-ordinate with the lender and remove these accounts after confirmation from the lender. Once removed permanently, it will correct one's credit score.

If not corrected, this will have long term implications as future lenders will continue to see this as actual default.

What precautions to take to safeguard against such frauds?

Well, regularly verifying one's credit report is the only way one can safeguard against such frauds. Such frauds may happen without the victim's knowledge, but the sooner one gets to know about it, the more effective one will be to combat such frauds. It's important to check one's credit report as a regular habit, preferably every month.