Risk & Fraud Glossary

The notice a creditor must give when it denies credit or offers worse terms, stating the specific principal reasons under ECOA and, when a consumer report was used, the FCRA disclosures.

The effect of disproportionately attracting the worst risks, because the price on offer is too good for them and too poor for everyone else.

Regaining physical possession of a stolen, unreturned or diverted asset — and the window for doing so is measured in hours, not days.

Pooling loans or receivables — auto loans, leases, card balances — into a special-purpose vehicle that issues securities to investors, paid from the cash flows of the pool.

A scam in which the victim is persuaded to send a payment themselves — by Zelle, wire or another push transfer — to an account the fraudster controls, usually through a story of urgency or a fake identity.

A loan secured by a vehicle the borrower already owns, with the lender recorded as lienholder on the title — from bank auto equity loans to high-cost title loans regulated state by state.

A check of a person's history — criminal, identity, driving, credit, sanctions — before hiring them, renting to them or granting them access to an asset.

A risk score built from how a person behaves — mobility, stability, ties and usage — rather than only from the credit history they happen to have accumulated.

A monthly fee for the use of a car that bundles the vehicle with insurance, maintenance and registration, with shorter commitments and more flexibility than a lease.

Insurance that pays for freight lost, stolen or damaged in transit — bought by the carrier to cover its legal liability for the load, or by the shipper to cover the goods themselves.

Stealing goods in transit or in storage along the supply chain — by hijacking, burglary of trailers and yards, or deception such as fictitious pickups — a crime that usually depends on inside information.

The US GAAP accounting standard (ASC 326) that requires lenders to reserve, from the day a loan is booked, for the credit losses expected over its entire life.

The US Bankruptcy Code procedure in which a business keeps operating while it restructures its debts under a court-confirmed plan, protected from creditors by the automatic stay.

The reversal of a card payment that the cardholder disputes with their issuer, which pulls the money back from the merchant through the card network.

A debt a creditor has sent to collections or charged off, reported to the credit bureaus as negative information that can stay on a credit report for about seven years.

The set of policies, controls and responsibilities that ensures a company follows laws, regulations and its own rules — and can prove that it does.

Following a financed, leased or insured asset across the whole contract, so risk changes surface before the loss rather than after it.

The record a consumer reporting agency keeps of a person's credit accounts, payment history, inquiries and certain public records, governed by the Fair Credit Reporting Act.

A number, usually between 300 and 850, that predicts how likely a person is to repay credit on time, computed from the data in their credit reports.

Assessing a person's or company's ability and willingness to repay, done before extending credit and setting its price and terms.

A search of court and repository records for a person's arrests and convictions, used in hiring, tenancy and licensing, and regulated in the US by the FCRA, equal-employment law and fair-chance rules.

The part of a covered loss the policyholder pays out of pocket before the insurance pays the rest — the higher it is, the lower the premium.

An image, video or audio clip synthesized by artificial intelligence to reproduce the face or voice of a real person doing or saying something they did not.

Delinquency is a missed payment past its due date; default is the point where the lender treats the debt as not going to be repaid under its terms — in US banking, typically at charge-off.

Producing or using false identity documents, or using another person's identifying information without authority, to commit fraud — federal crimes under 18 U.S.C. §1028 and §1028A.

An investigation carried out before a significant decision — onboarding a vendor, signing a partner, acquiring a company — to uncover risks the other party would not disclose.

Technology that compares the features of a face against one or more reference images to confirm or establish a person's identity.

The US law that prohibits bribing foreign officials to obtain or keep business and requires SEC-reporting companies to keep accurate books and adequate internal accounting controls.

Deliberate deception to obtain an undue advantage — credit, an insurance payout, an asset, a payment — at the expense of whoever trusted the information presented.

A geographic perimeter defined around a monitored asset, where crossing in or out fires an automatic alert.

A policyholder's or third party's request for payment after a covered event — collision, theft, fire, damage — which obliges the insurer to investigate it and, if valid, pay.

Faking, causing or inflating a claim — or misrepresenting the risk at purchase — to obtain a payout or a price one is not entitled to.

The written contract between insurer and policyholder that sets what is covered, for how much, under which conditions and at what premium.

The amount the policyholder pays for coverage, set from the insurer's expectation of loss plus expenses and profit, within rates regulated by each state.

Verifying a company before doing business with it — that it exists and actually operates, who controls it, and which individuals ultimately own it.

The process of identifying and profiling a customer — confirming who they are, assessing their risk and keeping that current — before and throughout the relationship.

Verifying that the person in front of the camera is present and alive at the moment of capture — not a photo, a screen replay, a mask or a synthetic video.

The ratio of losses incurred to premiums earned — the number that tells you whether the pricing was right.

Adjusting a contract's price during its term, when observed risk changes, instead of waiting for renewal.

Concealing or disguising the nature, source, ownership or control of criminal proceeds so they appear lawful — and the Bank Secrecy Act regime built to detect it.

US economic sanctions administered by Treasury's Office of Foreign Assets Control, whose Specially Designated Nationals list names people and entities whose assets are blocked and with whom US persons generally may not deal.

The right of consumers to have their financial data shared, at their request, with third parties they authorize — in the US grounded in Dodd-Frank §1033 and a 2024 CFPB rule that is now being reconsidered.

A person who holds or has held a prominent public function — and, by extension, their family and close associates — whose relationships call for risk-based due diligence; US rules speak of senior foreign political figures.

A scam in which a fake email, text, call or website impersonating a trusted company or person gets the victim to hand over passwords, account numbers, one-time codes or card details.

Frauds that pay earlier participants with money from new ones — a Ponzi scheme disguised as an investment, a pyramid scheme disguised as a business opportunity paying for recruitment.

Approving, declining or pricing inside the transaction itself, at a latency low enough that the customer never notices the analysis happening.

Buying, receiving, concealing or selling property known to be stolen — the crime that turns stolen vehicles and cargo into money through fences and chop shops.

A representation of the connections between people, companies, addresses, devices and assets, used to surface ties no single record shows.

Renting a vehicle, usually by the week, to people who drive for ride-hailing or delivery apps — a high-mileage, high-turnover segment in which the risk sits in who is driving.

Money or a card authorization held at the start of a rental to cover damage, unpaid charges or a late return, and released when the contract closes clean.

The identity, age, location and integrity controls that state-licensed sportsbooks must apply to every bettor, since the Supreme Court left sports betting to each state in 2018.

In the US, insurance is regulated by each state's insurance department, coordinated through the NAIC, under the McCarran-Ferguson Act's rule that insurance is subject to state law.

Someone who appears formally as the buyer, borrower or account holder while another party is the real beneficiary — used to separate risk, or dirty money, from whoever actually carries it.

A three-party guarantee in which a surety company backs a principal's obligation to an obligee — paying if the principal fails to perform — and then seeks reimbursement from the principal.

Fraud committed with an identity fabricated from a combination of real and invented personal information, built to pass verification without corresponding to a person who exists.

A consumer whose credit file is too thin, too stale or entirely absent to produce a score — not because their risk is high, but because they have not borrowed formally enough to leave a trace.

When an insurer decides a damaged or stolen vehicle is not worth repairing or recovering and pays its actual cash value instead, usually after which the car gets a salvage title.

A rented or leased vehicle the customer keeps past the end of the agreement without consent — a contract breach that state law can treat as theft or embezzlement once intent is shown.

The state laws that govern how businesses collect, use and share personal information in the absence of a general federal privacy law — led by California's CCPA as amended by the CPRA.

Auto insurance priced on how the vehicle is actually driven — miles, time of day, braking, speed — measured by telematics, instead of only on the profile at the time of purchase.

A device installed in a vehicle that transmits its location and, often, usage data, so the asset can be followed remotely and acted on in case of theft, non-return or default.

The lender taking back a financed or leased vehicle after default, usually without going to court, as long as it does so without a breach of the peace.

The lender's security interest in a financed vehicle, recorded on the state certificate of title, which lets it repossess the car on default and keeps the title from transferring cleanly until the loan is paid.

The federal crime of using interstate or foreign wire, radio or television communications — today, email, phone, internet and electronic payments — to execute a scheme to defraud or to obtain money or property by false pretenses.