I just ran across an interesting post over at the Lending Club blog… In it, they talk about the importance of identity verification for fraud prevention and what they’re doing to improve identity theft detection. Here’s what they had to say:
We continue to rely on methods of identity verification used by traditional lenders, but in an era of online identity theft, Lending Club is continually redefining industry best practices.
We cannot disclose our exact methodology, practices, or sources of information, as this could simply empower the fraudsters we are trying to disarm. But what we can say is that we use information gathered from social networks to help give us more confidence that a member is in fact who they say they are.
While it makes sense for them not to disclose detail of their approach, it would be fascinating (at least to me) to know how they’re implementing this. Any guesses?
Regardless of how they detect it, when they do find a case of ID theft, they say that they work with the true owner of the identity to track down and prosecute the fraudster, and they also reimburse lenders the unpaid principal balance of loans that involve identity theft.
Have any of you had any experience with a fraudulent Lending Club loan? I’ve had one default thus far, but I’m not aware of any instances of outright fraud.