Businesses urged to watch out for fraud, bad debts during Christmas period

The warning comes as new research shows young adults aged between 18 and 22 are the highest risk category, nearly twice as likely to commit application fraud than any other age group.

Dun & Bradstreet chief executive Christine Christian says businesses are more likely to commit fraud during the Christmas period as cashflow remains tight. Applicants who commit fraud are 25% more likely to engage in fraudulent activities in December, with that number increasing to 36% in January and 77% in February.

According to research conducted by the company, Christian says businesses need to be vigilant in identifying fraud, as the likelihood of recovering funds from companies or individuals engaging in illegal activities is “slight”.

“Businesses need to look for exaggerations on insurance or credit application forms. Most people who have been in the lending credit industry for a long time can generally detect what we call soft fraud, slight exaggerations on claims, and so on.”

“To prevent soft fraud from occurring, it is important to check application frauds with either credit reporting companies or identification verification companies and make sure you know what you’re dealing with.”

The company researched customers who had quickly increased the balance on a line of credit, and then intentionally did not make any payments. In a majority of cases applicants that recorded a missed payment were unlikely to have any debt recovered.

The company’s research also showed consumers who were unable to have their identity electronically verified are three times more likely to stop paying bills.

Christian says there are four points to identifying application fraud: identifying the speed at which an account goes into default, the large size of debt, the repetition of credit applications and the number of collections not recovered.

Additionally, she says businesses must understand the nature of debt and ensure they have strong cashflow to protect themselves in case they are affected.

“The problem is that if credit is granted during this period on a fraudulent application, the chance of being able to recover your money is very slight. The information on the application form does not often allow collection companies to pursue that debt.”

“All firms need to gain a clear understanding of their exposure to both failure and late payments and manage their customers and suppliers accordingly. As businesses look to gain a competitive edge cashflow is a critical component in every company’s success or failure. Tools like electronic identity verification and data analytics to assess where credit risks lie in your business are essential tools to ensure this occurs.”