We construct a measure of possible income misstatement (PIM) for first-time homebuyers by quantifying the gap between growth in incomes reported on mortgage applications and growth in incomes reported on tax files from 2004 to 2014 in Canada. Using a two-stage least square framework to correct for the endogenous nature of house prices and PIM, we find robust evidence that part of the observed dispersion in PIM is caused by house price variation. This suggests borrowers have greater incentive to misstate income in high-priced markets. We report evidence that markets with a tendency for income misstatement also had higher default rates.
{"title":"Possible Income Misstatement on Mortgage Loan Applications: Evidence from the Canadian Housing Market","authors":"Kiana Basiri, Babak Mahmoudi","doi":"10.2139/ssrn.3873425","DOIUrl":"https://doi.org/10.2139/ssrn.3873425","url":null,"abstract":"We construct a measure of possible income misstatement (PIM) for first-time homebuyers by quantifying the gap between growth in incomes reported on mortgage applications and growth in incomes reported on tax files from 2004 to 2014 in Canada. Using a two-stage least square framework to correct for the endogenous nature of house prices and PIM, we find robust evidence that part of the observed dispersion in PIM is caused by house price variation. This suggests borrowers have greater incentive to misstate income in high-priced markets. We report evidence that markets with a tendency for income misstatement also had higher default rates.","PeriodicalId":255992,"journal":{"name":"Consumer Financial Fraud eJournal","volume":"36 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-02-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129772425","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Online financial fraud targeted at consumers through phishing attacks and identity theft, for example, is a growing problem. Because it can be difficult to recover losses from the person who committed the fraud, the loss will often remain with either the financial institution or the consumer. This paper’s research question relates to how losses following online financial fraud are and should be allocated between these two parties according to relevant Scandinavian and European law. For payment-transaction fraud, questions of loss allocation are regulated by national rules implementing the liability regime for unauthorised payment transactions under the payment services directive. For other financial services, these questions are resolved according to general rules on contract and tort. The analysis shows that consumers are often left to deal with the losses caused by online financial fraud. It is argued that the digitalisation of the financial services industry has in practice led to a shift in who bears the risk for attacks against financial institutions. This conflicts with the EU’s stated policy goals to provide strong consumer protection in the field of cybercrime. The paper concludes that a larger portion of the losses incurred from online financial fraud should be allocated to financial institutions. financial services, digitalisation, fraud, consumer protection, payment services, liability, unauthorised payment transactions, electronic signatures, cyber security
{"title":"Who Pays When Things Go Wrong? Online Financial Fraud and Consumer Protection in Scandinavia and Europe","authors":"Marte Eidsand Kjørven","doi":"10.54648/eulr2020004","DOIUrl":"https://doi.org/10.54648/eulr2020004","url":null,"abstract":"Online financial fraud targeted at consumers through phishing attacks and identity theft, for example, is a growing problem. Because it can be difficult to recover losses from the person who committed the fraud, the loss will often remain with either the financial institution or the consumer. This paper’s research question relates to how losses following online financial fraud are and should be allocated between these two parties according to relevant Scandinavian and European law. For payment-transaction fraud, questions of loss allocation are regulated by national rules implementing the liability regime for unauthorised payment transactions under the payment services directive. For other financial services, these questions are resolved according to general rules on contract and tort. The analysis shows that consumers are often left to deal with the losses caused by online financial fraud. It is argued that the digitalisation of the financial services industry has in practice led to a shift in who bears the risk for attacks against financial institutions. This conflicts with the EU’s stated policy goals to provide strong consumer protection in the field of cybercrime. The paper concludes that a larger portion of the losses incurred from online financial fraud should be allocated to financial institutions.\u0000financial services, digitalisation, fraud, consumer protection, payment services, liability, unauthorised payment transactions, electronic signatures, cyber security","PeriodicalId":255992,"journal":{"name":"Consumer Financial Fraud eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-01-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130634052","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study how the interplay of disclosure and regulation shapes capital allocation in reward crowdfunding. Using data from Kickstarter, the largest online reward crowdfunding platform, we show that, even in the absence of clear regulation and enforcement mechanisms, disclosure helps entrepreneurs access capital for their projects and bolsters engagement with potential project backers, consistent with the notion that disclosure mitigates moral hazard. We further document that, subsequent to a change in Kickstarter’s terms of use that increases the threat of consumer litigation, the association between project funding and disclosure becomes stronger. This evidence suggests that consumer protection regulation enhances the perceived credibility of disclosure. We find the effect of the change in terms of use to be more pronounced in states with stricter consumer protection regulations. Taken together, our findings yield important insights on the role of disclosure, as well as on the potential effects of increased regulation on crowdfunding platforms.
{"title":"Does Consumer Protection Enhance Disclosure Credibility in Reward Crowdfunding?","authors":"Stefano Cascino, Maria Correia, Ane Tamayo","doi":"10.2139/SSRN.3170230","DOIUrl":"https://doi.org/10.2139/SSRN.3170230","url":null,"abstract":"We study how the interplay of disclosure and regulation shapes capital allocation in reward crowdfunding. Using data from Kickstarter, the largest online reward crowdfunding platform, we show that, even in the absence of clear regulation and enforcement mechanisms, disclosure helps entrepreneurs access capital for their projects and bolsters engagement with potential project backers, consistent with the notion that disclosure mitigates moral hazard. We further document that, subsequent to a change in Kickstarter’s terms of use that increases the threat of consumer litigation, the association between project funding and disclosure becomes stronger. This evidence suggests that consumer protection regulation enhances the perceived credibility of disclosure. We find the effect of the change in terms of use to be more pronounced in states with stricter consumer protection regulations. Taken together, our findings yield important insights on the role of disclosure, as well as on the potential effects of increased regulation on crowdfunding platforms.","PeriodicalId":255992,"journal":{"name":"Consumer Financial Fraud eJournal","volume":"47 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125630286","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Elizabeth A. Berger, Alexander W. Butler, Erik J. Mayer
We use individual credit histories to study how creditor-friendly repossession rights in auto lending affect borrowers. Results from a quasi-experimental setting show that bankruptcy rates among subprime auto borrowers increase twice as much following natural disasters in states with strong creditors’ rights compared to states with more borrower protection. Further tests show that auto repossessions increase the likelihood of bankruptcy, and reduce borrowers’ future access to both uncollateralized and collateralized credit, including home mortgage loans. Our findings suggest that creditors’ rights can have broad, negative effects on borrowers that extend beyond merely losing a collateralized asset.
{"title":"Credit Where Credit Is Due: Drivers of Subprime Credit","authors":"Elizabeth A. Berger, Alexander W. Butler, Erik J. Mayer","doi":"10.2139/ssrn.2989380","DOIUrl":"https://doi.org/10.2139/ssrn.2989380","url":null,"abstract":"We use individual credit histories to study how creditor-friendly repossession rights in auto lending affect borrowers. Results from a quasi-experimental setting show that bankruptcy rates among subprime auto borrowers increase twice as much following natural disasters in states with strong creditors’ rights compared to states with more borrower protection. Further tests show that auto repossessions increase the likelihood of bankruptcy, and reduce borrowers’ future access to both uncollateralized and collateralized credit, including home mortgage loans. Our findings suggest that creditors’ rights can have broad, negative effects on borrowers that extend beyond merely losing a collateralized asset.","PeriodicalId":255992,"journal":{"name":"Consumer Financial Fraud eJournal","volume":"254 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-06-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117322330","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
D. Bailey, J. Borwein, A. Salehipour, Marcos M. López de Prado
Many investors rely on market experts and forecasters when making investment decisions, such as when to buy or sell securities. Ranking and grading market forecasters provide investors with metrics on which they may choose forecasters with the best record of accuracy for their particular market exposure. This study develops a novel ranking methodology to rank the market forecaster. In particular, we distinguish forecasts by their specificity, rather than considering all predictions and forecasts equally important, and we also analyze the impact of the number of forecasts made by a particular forecaster. We have applied our methodology on a dataset including 6,627 forecasts made by 68 forecasters.
{"title":"Do Financial Gurus Produce Reliable Forecasts?","authors":"D. Bailey, J. Borwein, A. Salehipour, Marcos M. López de Prado","doi":"10.2139/ssrn.3339657","DOIUrl":"https://doi.org/10.2139/ssrn.3339657","url":null,"abstract":"Many investors rely on market experts and forecasters when making investment decisions, such as when to buy or sell securities. Ranking and grading market forecasters provide investors with metrics on which they may choose forecasters with the best record of accuracy for their particular market exposure. This study develops a novel ranking methodology to rank the market forecaster. In particular, we distinguish forecasts by their specificity, rather than considering all predictions and forecasts equally important, and we also analyze the impact of the number of forecasts made by a particular forecaster. We have applied our methodology on a dataset including 6,627 forecasts made by 68 forecasters.","PeriodicalId":255992,"journal":{"name":"Consumer Financial Fraud eJournal","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-02-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129860630","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper demonstrates that the Millennials exhibit a unique personality treats that has implications on their portfolio choice, and hence on the stock market. Specifically, Millennials display greater propensity to participate in the stock market, exhibit more confident, as they trade more frequently, and more diverse (invest more in many stocks and foreign assets). At the macro level, we find that the stock market behaves differently surrounding holidays, and the statistical significance of key financial anomalies disrupted. Collectively, we infer that the financial market not only exposed to business cycles, but also to generation cycles.
{"title":"The Millennials Acts in Finance","authors":"Yosef Bonaparte","doi":"10.2139/ssrn.3103883","DOIUrl":"https://doi.org/10.2139/ssrn.3103883","url":null,"abstract":"This paper demonstrates that the Millennials exhibit a unique personality treats that has implications on their portfolio choice, and hence on the stock market. Specifically, Millennials display greater propensity to participate in the stock market, exhibit more confident, as they trade more frequently, and more diverse (invest more in many stocks and foreign assets). At the macro level, we find that the stock market behaves differently surrounding holidays, and the statistical significance of key financial anomalies disrupted. Collectively, we infer that the financial market not only exposed to business cycles, but also to generation cycles.","PeriodicalId":255992,"journal":{"name":"Consumer Financial Fraud eJournal","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124140850","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigates which factors drive the prepayment of Peer-to-Peer (P2P) lending based on the data collected from Prosper.com. By using the lending data of 50,109 loans between July 2009 and August 2013, we find that higher interest rate and loan amount indicate lower probability that the borrower fully paid the loan before the maturity. For the borrower characteristics, debt to income, employment length, delinquent amount, and revolving payment are significantly and negatively affect the outcome of the loans. Macroeconomic variable GDP growth is positivity significant while lending rate is negatively and significantly related to the probability of prepayment of the loans. We also find that monthly income and Prosper Rating are the main reasons which drive the borrowers to fully paid the loan before the maturity.
{"title":"Which Factors Drive the Prepayment of P2P Lending? Evidence from Prosper.Com","authors":"Shaofang Li, Xiaolin Li","doi":"10.2139/ssrn.3054424","DOIUrl":"https://doi.org/10.2139/ssrn.3054424","url":null,"abstract":"This paper investigates which factors drive the prepayment of Peer-to-Peer (P2P) lending based on the data collected from Prosper.com. By using the lending data of 50,109 loans between July 2009 and August 2013, we find that higher interest rate and loan amount indicate lower probability that the borrower fully paid the loan before the maturity. For the borrower characteristics, debt to income, employment length, delinquent amount, and revolving payment are significantly and negatively affect the outcome of the loans. Macroeconomic variable GDP growth is positivity significant while lending rate is negatively and significantly related to the probability of prepayment of the loans. We also find that monthly income and Prosper Rating are the main reasons which drive the borrowers to fully paid the loan before the maturity.","PeriodicalId":255992,"journal":{"name":"Consumer Financial Fraud eJournal","volume":"103 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-10-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131441489","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The case study draws primarily from the 113 page report of the Wells Fargo board’s independent investigation of retail banking sales practices. The case study also relies on the Office of the Comptroller of the Currency’s report titled: Lessons Learned Review Of Supervision Of Sales Practices At Wells Fargo. Additional details are sourced from various Wells Fargo regulatory reports. The case study is intended to be used as a resource for directors at banks and financial services institutions of all sizes, so that they may learn from, and hopefully avoid, mistakes that were made over many years throughout Wells Fargo’s corporate hierarchy. All errors are our own.
该案例研究主要来自富国银行董事会对零售银行业务销售行为进行的113页独立调查报告。该案例研究还依赖于美国货币监理署(Office of The Comptroller of The Currency)题为《对富国银行(Wells Fargo)销售行为监管的教训回顾》的报告。其他细节来自富国银行的各种监管报告。该案例研究旨在为各种规模的银行和金融服务机构的董事提供参考，以便他们可以从富国银行(Wells Fargo)公司多年来所犯的错误中吸取教训，并有希望避免这些错误。所有的错误都是我们自己的。
{"title":"Wells Fargo Unauthorized Account Openings: A Case Study for Bank Board Directors","authors":"Joseph A. Smith Jr., Lee Reiners","doi":"10.2139/ssrn.3169565","DOIUrl":"https://doi.org/10.2139/ssrn.3169565","url":null,"abstract":"The case study draws primarily from the 113 page report of the Wells Fargo board’s independent investigation of retail banking sales practices. The case study also relies on the Office of the Comptroller of the Currency’s report titled: Lessons Learned Review Of Supervision Of Sales Practices At Wells Fargo. Additional details are sourced from various Wells Fargo regulatory reports. The case study is intended to be used as a resource for directors at banks and financial services institutions of all sizes, so that they may learn from, and hopefully avoid, mistakes that were made over many years throughout Wells Fargo’s corporate hierarchy. All errors are our own.","PeriodicalId":255992,"journal":{"name":"Consumer Financial Fraud eJournal","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-04-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132834421","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-12-17DOI: 10.21799/FRBP.WP.2015.45
Ronel Elul, Sebastian Tilson
We use a matched credit bureau and mortgage data set to identify occupancy fraud in residential mortgage originations, that is, borrowers who misrepresented their occupancy status as owner occupants rather than residential real estate investors. In contrast to previous studies, our data set allows us to show that such fraud was broad based, appearing in the government-sponsored enterprise market and in loans held on bank portfolios as well. Mortgage borrowers who misrepresented their occupancy status performed worse than otherwise similar owner occupants and declared investors, defaulting at nearly twice the rate. In addition, these defaults are significantly more likely to be 'strategic' in the sense that their bank card performance is better and utilization is lower.
{"title":"Owner Occupancy Fraud and Mortgage Performance","authors":"Ronel Elul, Sebastian Tilson","doi":"10.21799/FRBP.WP.2015.45","DOIUrl":"https://doi.org/10.21799/FRBP.WP.2015.45","url":null,"abstract":"We use a matched credit bureau and mortgage data set to identify occupancy fraud in residential mortgage originations, that is, borrowers who misrepresented their occupancy status as owner occupants rather than residential real estate investors. In contrast to previous studies, our data set allows us to show that such fraud was broad based, appearing in the government-sponsored enterprise market and in loans held on bank portfolios as well. Mortgage borrowers who misrepresented their occupancy status performed worse than otherwise similar owner occupants and declared investors, defaulting at nearly twice the rate. In addition, these defaults are significantly more likely to be 'strategic' in the sense that their bank card performance is better and utilization is lower.","PeriodicalId":255992,"journal":{"name":"Consumer Financial Fraud eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-12-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125401947","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
H. Joudaki, A. Rashidian, B. Minaei-Bidgoli, M. Mahmoudi, Bijan Geraili, M. Nasiri, M. Arab
BACKGROUND We aimed to identify the indicators of healthcare fraud and abuse in general physicians' drug prescription claims, and to identify a subset of general physicians that were more likely to have committed fraud and abuse. METHODS We applied data mining approach to a major health insurance organization dataset of private sector general physicians' prescription claims. It involved 5 steps: clarifying the nature of the problem and objectives, data preparation, indicator identification and selection, cluster analysis to identify suspect physicians, and discriminant analysis to assess the validity of the clustering approach. RESULTS Thirteen indicators were developed in total. Over half of the general physicians (54%) were 'suspects' of conducting abusive behavior. The results also identified 2% of physicians as suspects of fraud. Discriminant analysis suggested that the indicators demonstrated adequate performance in the detection of physicians who were suspect of perpetrating fraud (98%) and abuse (85%) in a new sample of data. CONCLUSION Our data mining approach will help health insurance organizations in low-and middle-income countries (LMICs) in streamlining auditing approaches towards the suspect groups rather than routine auditing of all physicians.
{"title":"Improving Fraud and Abuse Detection in General Physician Claims: A Data Mining Study","authors":"H. Joudaki, A. Rashidian, B. Minaei-Bidgoli, M. Mahmoudi, Bijan Geraili, M. Nasiri, M. Arab","doi":"10.15171/ijhpm.2015.196","DOIUrl":"https://doi.org/10.15171/ijhpm.2015.196","url":null,"abstract":"BACKGROUND\u0000We aimed to identify the indicators of healthcare fraud and abuse in general physicians' drug prescription claims, and to identify a subset of general physicians that were more likely to have committed fraud and abuse.\u0000\u0000\u0000METHODS\u0000We applied data mining approach to a major health insurance organization dataset of private sector general physicians' prescription claims. It involved 5 steps: clarifying the nature of the problem and objectives, data preparation, indicator identification and selection, cluster analysis to identify suspect physicians, and discriminant analysis to assess the validity of the clustering approach.\u0000\u0000\u0000RESULTS\u0000Thirteen indicators were developed in total. Over half of the general physicians (54%) were 'suspects' of conducting abusive behavior. The results also identified 2% of physicians as suspects of fraud. Discriminant analysis suggested that the indicators demonstrated adequate performance in the detection of physicians who were suspect of perpetrating fraud (98%) and abuse (85%) in a new sample of data.\u0000\u0000\u0000CONCLUSION\u0000Our data mining approach will help health insurance organizations in low-and middle-income countries (LMICs) in streamlining auditing approaches towards the suspect groups rather than routine auditing of all physicians.","PeriodicalId":255992,"journal":{"name":"Consumer Financial Fraud eJournal","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-11-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131190480","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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