Credit repair companies are playing a substantial role in fueling the surge of synthetic identity fraud, accounting for 85% of identity fraud cases and causing businesses financial losses exceeding $20 billion in 2020.
Synthetic ID fraud is further intensified by the Social Security Administration’s decision to randomize Social Security numbers, creating challenges for fraud detection systems. Unethical credit repair entities contribute by persuading individuals in debt to erase their poor credit history and adopt new identities using “credit profile numbers,” often unissued or stolen Social Security numbers.
The global credit repair services market, projected to reach $4.26 billion in 2023 and expected to grow to $10 billion by 2030, faces scrutiny due to the involvement of a small percentage of companies in fraudulent activities.
Fraudulent credit repair firms exploit vulnerabilities at financial institutions, capitalizing on limited Social Security number verifications. The challenge with synthetic identities lies in their diverse methods, with credit repair agencies selling unissued Social Security numbers and instructing consumers to change various pieces of personal information to bypass credit agencies’ matching keys.
Fraudulent credit repair companies also take advantage of the fact that only a few lenders verify Social Security numbers with the Social Security Administration. They exploit tradelines reporting debts and payment history to credit bureaus, offering authorized, primary, and zombie debt tradelines, resulting in an immediate boost to consumers’ credit scores.
These illicit practices create challenges for financial institutions, requiring a holistic and cross-departmental view of fraud strategy to combat first-party frauds, including synthetics and chronic abusers of dispute methods.
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