One of the key elements to increasing the likelihood of a paid debt is ensuring the consumer you're loaning to is actually who they say they are.
Identity theft is an ever-present threat to both debtors and lenders, especially in times of harsh economic climates. After acquiring Social Security numbers and credit card details, a thief can potentially get approved for a loan under a false identity. Additionally, by the time the debt collector or lending agency realized the falsehoods, it could be too late for a swift and successful criminal investigation. Before approving a debtor, you should specifically focus on credit report screening and identification verification, along with other facets of background checks. The Boston Globe recently interviewed Kellie O'Shea, a representative of a background screening agency, who stated there were hundreds of options when considering the type of background check to assess on a potential client or employee. "When a third party, a consumer reporting agency, conducts a background check, separate from the reference check, the employer and the consumer reporting agency are subject to the Federal Fair Credit Reporting Act," said O'Shea. "A clear disclosure is required regarding the background check. These disclosures are usually accompanied by a release form that includes a wide scope of search types allowed in the background check." According to the Fair Credit Reporting Act of 1971, in order to conduct a credit check, you must clearly state in writing to the applicant that you will be doing so. If the applicant requests reasoning for the check, you must provide it to them within five days. You have every right to find out if the applicant's credit history is reputable, as you are running a business that depends on the reputability of each individual's records. If an applicant fails to agree to any of your terms, you have the option of declining their loan request. Other areas you may want to investigate are the applicant's current and past work history. If you find they are in and out of jobs, this may raise a red flag and you may consider lowering the amount of the loan. If they've exhibited the ability to maintain jobs for long periods of time, this may be a sign of a reliable applicant.