FICO and Equifax Warn Banks that “Hidden Fraud” Is on the Rise

LONDON—February 23, 2012—FICO (NYSE:FICO), the leading provider of analytics and decision management technology, and global information solutions leader Equifax today warned UK credit grantors that such threats as first-party fraud are growing, despite the reduction in UK card fraud. The two companies hosted an anti-fraud roundtable today in London with a group of card issuers and processors to explore changing patterns, and discuss how FICO and Equifax are working together to improve fraud detection.

"Reported UK card fraud is at its lowest level in a decade, but these reports may not be telling the whole story," said Martin Warwick, FICO's fraud chief for EMEA, in a presentation with Neil Lewis, head of Consumer Products at Equifax. "It's true that UK card issuers have made tremendous gains in the area of plastic fraud, but that hasn't necessarily deterred the criminals - they are simply finding other ways to attack credit grantors and their customers."

In October 2011, the UK Cards Association reported that UK card fraud losses dropped by 9 percent in the first half of 2011 compared to the prior year, and stood at the lowest level in 11 years. FICO's own figures, released last month, show counterfeit card fraud fell by 60 percent across Europe from 2009 to 2011. Warwick and Lewis attributed these gains largely to improved use of fraud analytics and to adoption of chip and PIN.

However, Warwick and Lewis said criminals thwarted by industry innovation are turning to other schemes, such as online fraud and first-party fraud, in which people obtain credit under their own name, but with no intention to repay. Warwick and Lewis said that often these criminals will spend 130 % of their credit limit and then vanish.

"First-party fraud blurs the line between fraud and bad debt, because it doesn't involve counterfeit cards, stolen cards or false identities," said Lewis. "Some borrowers will make a couple of payments early, and then stop altogether in a 'hit-and-run' scenario. There are opportunists who sign up for loans with a bank where others have recently gotten away with first-party fraud, and there are 'sleepers' who make payments for months in order to fool a bank into relaxing its rules and granting more credit. Organized crime rings even recruit borrowers to take out credit that won't be paid back, with the borrower getting a portion of the take."

Warwick and Lewis said other types of fraud are also rising, such as a low-tech device inserted into a cash machine slot that traps the card. "A 'friendly' bystander will tell you to enter your PIN again, and when the card still isn't returned they'll tell you that you will have to report it to the bank," Warwick said. "As soon as you're gone, the bystander steals cash from your account."

At the meeting, FICO and Equifax described their joint initiative to improve consumer identification and fraud detection. This initiative is part of the expanded partnership that the two companies formed in the UK last year.

About Equifax (www.equifax.com)
Equifax is a global leader in consumer, commercial and workforce information solutions, providing businesses of all sizes and consumers with information they can trust. We organize and assimilate data on more than 500 million consumers and 81 million businesses worldwide, and use advanced analytics and proprietary technology to create and deliver customized insights that enrich both the performance of businesses and the lives of consumers.

Headquartered in Atlanta, Equifax operates or has investments in 17 countries and is a member of Standard & Poor’s (S&P) 500^® Index. Its common stock is traded on the New York Stock Exchange (NYSE) under the symbol EFX. For more information, please visit www.equifax.com.

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