Personal Finance

Pay stub fraud jumps into secured lending

  • Last Updated:
  • Dec 10th, 2020 12:08 am
[OP]
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Apr 16, 2007
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Financial District B…

Pay stub fraud jumps into secured lending

If any of you want to know why some lenders demand pay statements over and above employment letters here's a reason why.

People lying or padding income disclosure on credit card applications is not a new thing. People lie because they think the CC issuer will never ask for proof of income or even perform employment verification.

Many may see some lenders are tightening these measures due to fraud and loan defaults.
Flagged if caught.


https://www.autonews.com/finance-insura ... to-lending
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16 replies
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It's not mainly due to fraud, it's more due to covid.

Even in current environment, not a lot lenders ask income proof. Even they do ask, it's not fraud concern
[OP]
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opps, sorry, guess you guys need a subscription to read it
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[OP]
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smartie wrote: It's not mainly due to fraud, it's more due to covid.

Even in current environment, not a lot lenders ask income proof. Even they do ask, it's not fraud concern
No, this has nothing to do with COVID
If you produce a paystub for a make-believe employer that does not exist or produce a paystub stating you netted $3600 for a two week pay period when your payroll dept states you only grossed $2000 then yes that would be fraud. Again, this has nothing to do with COVID. It's all about misrepresentation.
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mikeymike1 wrote: No, this has nothing to do with COVID
If you produce a paystub for a make-believe employer that does not exist or produce a paystub stating you netted $3600 for a two week pay period when your payroll dept states you only grossed $2000 then yes that would be fraud. Again, this has nothing to do with COVID. It's all about misrepresentation.
What if someone owns a corporation. Only draWs dividends, or reinvest back into company.
Then he pays himself a huge salary to produce pay stubs. Even does source deductions everything legit.
Now he makes $100k.
Then he gets approved, but stops drawing a salary.
Is this fraud?
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mikeymike1 wrote: No, this has nothing to do with COVID
If you produce a paystub for a make-believe employer that does not exist or produce a paystub stating you netted $3600 for a two week pay period when your payroll dept states you only grossed $2000 then yes that would be fraud. Again, this has nothing to do with COVID. It's all about misrepresentation.
But how is the the reason for
"If any of you want to know why some lenders demand pay statements over and above employment letters here's a reason why."

If this pay statement fraud widely exists, then shouldn't companies ask other income proof instead of pay statement since pay slip no longer legitimate proof?
[OP]
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smartie wrote: But how is the the reason for
"If any of you want to know why some lenders demand pay statements over and above employment letters here's a reason why."

If this pay statement fraud widely exists, then shouldn't companies ask other income proof instead of pay statement since pay slip no longer legitimate proof?
Legit paystubs are obvious "legit proof". Especially if they come from a national payroll service like Meridian, Ceridian etc. because it's easy to call them up to confirm.

Some banks just won't take an applicants word for their income disclosure on app anymore. IMO it should be mandatory that all pay statements/stubs be produced period.
It's mainly the revolving credit division that does not demand income and employment proof and/or verification.
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mikeymike1 wrote: Legit paystubs are obvious "legit proof". Especially if they come from a national payroll service like Meridian, Ceridian etc. because it's easy to call them up to confirm.

Some banks just won't take an applicants word for their income disclosure on app anymore. IMO it should be mandatory that all pay statements/stubs be produced period.
It's mainly the revolving credit division that does not demand income and employment proof and/or verification.
Which banks you see significantly increases the request to ask pay slip?

And if what you said is true, wouldn't those revolving product departments require income proof since it's unsecured lending?
Last edited by smartie on Dec 9th, 2020 6:44 pm, edited 1 time in total.
[OP]
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UrbanPoet wrote: What if someone owns a corporation. Only draWs dividends, or reinvest back into company.
Then he pays himself a huge salary to produce pay stubs. Even does source deductions everything legit.
Now he makes $100k.
Then he gets approved, but stops drawing a salary.
Is this fraud?
The income declared at app process must be verified. If the applicant is BFS then obvious T1 Gens and/or NOA's are required to properly access debt service. How the applicant draws his income afterwards down the road from the business is not a concern. If the applicant wants to borrow $80k he needs to prove he can service the payments for that $80k over term.
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[OP]
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smartie wrote: Which banks you see significantly increases the request to ask pay slip?
All of them do if you are applying for a secured loan like an auto loan, mortgage etc. But that's not the point. The point is fraudsters are applying for loans and embellishing their income levels to try get approved for bigger loans. Then when asked to provide proof of income the paystubs are fake.

smartie wrote: And if what you said is true, wouldn't those revolving product departments require income proof since it's unsecured lending?
I already answered this above. But some banks do request proof of income for revolving
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mikeymike1 wrote: All of them do if you are applying for a secured loan like an auto loan, mortgage etc. But that's not the point. The point is fraudsters are applying for loans and embellishing their income levels to try get approved for bigger loans. Then when asked to provide proof of income the paystubs are fake.



I already answered this above. But some banks do request proof of income for revolving
For secured product such as mortgage, it's because bank need calculate tdsr and gdsr, not necessarily for fraud prevention purposes
[OP]
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smartie wrote: For secured product such as mortgage, it's because bank need calculate tdsr and gdsr, not necessarily for fraud prevention purposes
Mortgage lenders and banks don't need proof at the onset. We can calculate tdsr/gdsr without paystubs. Paystubs are only required to confirm the income (if unable to contact payroll/PR at employment) that the applicant stated is indeed factual.
Income statements are usually presented at contract signing/closing.
This is where the fraud (if any) is exposed
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mikeymike1 wrote: The income declared at app process must be verified. If the applicant is BFS then obvious T1 Gens and/or NOA's are required to properly access debt service. How the applicant draws his income afterwards down the road from the business is not a concern. If the applicant wants to borrow $80k he needs to prove he can service the payments for that $80k over term.
What if the applicant doesnt say they are bfs?
They just simply say “i work for abc corp and heres my pay stubs...”.

Pay stubs are real. Verified with adp direct deposits into his bank account.
[OP]
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UrbanPoet wrote: What if the applicant doesnt say they are bfs?
They just simply say “i work for abc corp and heres my pay stubs...”.

Pay stubs are real. Verified with adp direct deposits into his bank account.
Stubs from a known payroll org are less likely to be fake/made up/fraudulent
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FIs trying to be responsible lenders...get outta here.
Dealers will get you that loan regardless.
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This whole article is about the US Market, not Canada.
Wouldn't be surprised if loan application fraud is skyrocketing in our country though.
Booyayyc wrote: The article appears to be behind a paywall.
mikeymike1 wrote: opps, sorry, guess you guys need a subscription to read it
I could read it just fine.
Though I'm using NoScript, and most of the javascripts on the page (except from autonews.com itself) are disabled.

A lot of paywalls are just some client-side scripting that assumes the viewer's browser is playing by certain rules, btw.
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