Muddying the Waters

As first-party fraud has become more prevalent worldwide, data from FICO indicates that nearly one-third of respondents believe lying on credit applications is either justifiable in certain situations or a common practice.

The surge in inflation and high interest rates has placed significant financial pressure on consumers. This pressure has led to an increase in credit card debt and has caused many lenders to reduce credit limits, tighten lending standards, and focus more on affluent customers, as highlighted by the recent overhauls of premium cards.

FICO notes that consumers often misrepresent or inflate details on credit applications in an attempt to secure financing, sometimes without fully understanding the financial risks and legal repercussions involved.

For those struggling financially, committing fraud might seem like a viable solution. However, as FICO points out, it typically ends up exacerbating their situation.

A Strange Dichotomy

The increasing prevalence of first-party fraud has led to a critical challenge for financial institutions: accurately classifying the nature of such fraud. Only then can banks and credit unions effectively provide the fraud defenses that customers expect.

Despite this, FICO’s survey reveals a peculiar contrast: while more consumers are engaging in fraud themselves, they are simultaneously seeking stronger fraud protections.

The survey found that nearly one-third of respondents prioritize fraud protection as their top priority when opening a new account—above factors like value and customer service. Over half said solid fraud protection is among their top three considerations when choosing a financial institution.