Filipinos okay with overstating income when applying for loans, survey shows

MORE FILIPINOS are fine with overstating their income for loan applications, a survey by analytics software provider FICO showed, highlighting the need for financial institutions to improve their risk assessment.

According to a FICO study conducted in November 2023, more than half (51%) of 1,001 Filipino respondents said it was okay for them to exaggerate their income levels for loan applications, higher than the 35% seen in the 2022 survey and the global average of 39% this year, it said in a statement on Thursday.

“With a noticeable percentage of Filipino consumers viewing income falsification as acceptable or justified, the problem of ‘liar loans’ calls for financial institutions to strengthen their risk assessment procedures,” FICO APAC Segment Leader for Risk Lifecycle and Decision Management Aashish Sharma said.

“Banks play an essential role in steering consumers away from inadvertently committing fraud through robust fraud detection strategies and consumer education,” he added.

According to the survey, more than half of Filipinos think it is normal or acceptable in some cases to misrepresent their income on their applications for a bank account (56%), automotive financing (55%), or mortgage (53%).

“Similarly, many Filipinos are fine with exaggerating income on personal loan applications, further complicating financial integrity,” FICO said.

Meanwhile, 46% of Filipino respondents said it is never acceptable to exaggerate their income for a personal loan application, while 36% said it is acceptable under select conditions.

“About one in seven views exaggerating income on personal loan, mortgage and auto loan applications as common and acceptable behavior,” FICO said.

In comparison, globally, majority of the respondents (56%) said exaggerating income on loan applications was never acceptable. One in four or 24% said it was permissible under certain circumstances, while 15% viewed it as normal practice.

Meanwhile, the survey also showed that 37% of Filipino respondents said it is acceptable to lie on mortgage applications, with 16% saying this is normal.

FICO said the results highlight the risk assessment and asset quality challenges that could be faced by Philippine financial institutions.

“Even when a mortgage application from an existing customer appears legitimate on paper, the established banking relationship can be exploited to commit fraud. By exaggerating income, such as inflating self-employment earnings or overstating bonuses, as well as omitting debts or misrepresenting personal circumstances applicants can manipulate the loan process, making it difficult for lenders to detect these discrepancies without thorough and proactive verification measures,” it said.

On the other hand, 62% of Filipino respondents said it is never acceptable to exaggerate the value of stolen property or add false items to an insurance claim, while 41% said it is unacceptable to exaggerate income on a mobile phone contract or when applying for automotive financing.

“Financial institutions must adopt a holistic approach to data to overcome the unique challenges posed by application fraud,” Mr. Sharma said. “This should include integrating comprehensive data analysis and continuously monitoring accounts for early detection of sleeper fraud.”

“The FICO survey reveals an alarming acceptance of application fraud among consumers, potentially driven by rising cost-of-living pressures. Financial institutions must evolve their fraud strategies to keep pace with such trends and prevent customers from unwittingly engaging into questionable or criminal behavior,” he added. — AMCS