How Fraudsters Exploit Popular Interest-free Payment Plans (cnbc.com) 38
Buy now, pay later services aren't just popular among consumers. They're also proving to be a hit with criminals. From a report: Fraudulent activity is on the rise at some of the largest buy now, pay later (BNPL) platforms in the industry, which include Klarna, Afterpay and Affirm, according to fraud experts who spoke with CNBC. BNPL products let shoppers split the cost of their purchases over three or four months, often interest-free. They've become massively popular in the U.S. and Europe, and generated almost $100 billion in transactions globally in 2020 alone. "Criminals love buy now, pay later," Martin Rehak, CEO and co-founder of Czech fraud detection start-up Resistant AI, told CNBC. "You can already see crime on multiple levels." Criminal gangs are exploiting weaknesses in the application process for BNPL loans, experts say, using clever tactics to slip through undetected and steal items ranging from pizza and booze to video game consoles.
One of the vulnerabilities, Rehak says, is BNPL firms' reliance on data for approving new clients. Many companies in the industry don' conduct formal credit checks, instead using internal algorithms to determine creditworthiness based on the information they have available to them. Retailers working with BNPL platforms "categorize things differently," Rehak said, adding that this can lead to inconsistency. "There is always a way to exploit this and basically steal from you using someone else's mistake." For example, a partner merchant may run a special promotion event for alcohol but assign a vague category like "special event." This runs the risk of fraud falling through the cracks if an artificial intelligence system doesn't recognize the category and gives it a more generic label with low default risk. Rehak said many scammers are stealing people's identities or taking over their accounts to evade detection, making unsuspecting victims foot the bill. He declined to name any specific companies being targeted, however, saying Resistant AI counts a number of BNPL businesses as clients.
One of the vulnerabilities, Rehak says, is BNPL firms' reliance on data for approving new clients. Many companies in the industry don' conduct formal credit checks, instead using internal algorithms to determine creditworthiness based on the information they have available to them. Retailers working with BNPL platforms "categorize things differently," Rehak said, adding that this can lead to inconsistency. "There is always a way to exploit this and basically steal from you using someone else's mistake." For example, a partner merchant may run a special promotion event for alcohol but assign a vague category like "special event." This runs the risk of fraud falling through the cracks if an artificial intelligence system doesn't recognize the category and gives it a more generic label with low default risk. Rehak said many scammers are stealing people's identities or taking over their accounts to evade detection, making unsuspecting victims foot the bill. He declined to name any specific companies being targeted, however, saying Resistant AI counts a number of BNPL businesses as clients.
Re: These are ultra high interest loans (Score:2, Interesting)
Those stores aren't closing due to theft. They are closing because they are running marginally profitable businesses in areas where rising rents has made the cost of doing business too high.
In these situations, you cut staff and try to extract as much revenue from the store as you can before shutting down. Part of those cuts are likely to security. But that's ok, because if things are stolen, you file an insurance claim and get paid anyway. When your insurance premiums rise, you shutter the store.
For busine
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Re: These are ultra high interest loans (Score:5, Interesting)
I work in a grocery store. We get robbed over liquor and non edible merchandise so hard it's not even funny. Since we aren't allowed to physically stop anyone from stealing, we simply just try and get them out of the store.
As the poster above said, anything under $950 is a misdemeanor and not worth anyone's time. It's really frustrating seeing it happen and knowing that if you get to involved in trying to recover the stolen merchandise, you are likely to lose your job, aka they fire you.
The cost of an injury is much worse then whatever amount of money is stolen. It's a lot too. Our last inventory our total loss for 6 months was 500k, with half of it being liquor and GM (non food). People steal food also and of course things do get broken here and there.
That doesn't even count our perimeter departments, like produce, bakery, meat or deli. That's just center of the store plus dairy and frozen.
Clearly our company seems to be affording it and they likely can just write off the losses anyway, but it's truly not a crime to steal from a retailer in California.
The only reasons employees can't steal is because it's against company policy. If we do it and get caught we'd be prosecuted, but if you don't work for us, steal whatever the fuck you can carry out. If you do get tackled, (you won't, never seen that in 21 years) sue the company and claim you were just going to get a basket or shopping cart.
Most people don't steal because they have morals but the shrink numbers don't lie. It's very sad.
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but it's truly not a crime to steal from a retailer in California. The only reasons employees can't steal is because it's against company policy.
If by truly, you mean NOT at all true, then yes. A misdemeanor is still a crime.
Re: These are ultra high interest loans (Score:2)
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If your employer really cared, they could just put the high theft items behind a counter and have a deli like service model for those goods.
This is really just a bunch of hassle for legit customers that does very little to actually curb theft.
Wow! That sounds almost like an anti-DRM complaint. ;-)
That's an enforcement problem. (Score:2)
If the police would actually arrest these shoplifters, it wouldn't matter so much that it's a misdemeanor.
But from how police are funded, they'd much rather have an officer sit in a speed trap instead of respond to a call about shoplifters.
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Don't you mean "de-funded"? It's not like that would have never had a negative effect or anything.
Re: That's an enforcement problem. (Score:3)
What has had an actual negative effect on policing is giving them money without oversight, which is typically spent on oppression.
Defunding the police doesn't just mean slashing budgets, it means taking responsibilities away from them as well. They are responding to situations for which they are not trained, and botching the response. They refuse to train for them, so we must refuse to pay them. This does not preclude paying someone whose first recourse for problem solving is not force.
You probably already
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Worth mentioning that SF police have a reputation for being abusive and unprofessional. https://medium.com/indian-thou... [medium.com]
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Part of those cuts are likely to security.
A store shouldn't need to hire its own security guards. If it does, the town has too much crime.
Re: These are ultra high interest loans (Score:2)
That depends on TONS of factors. But I don't know of any apartment building in a major city that doesn't hire their own security. If you want someone to come hear your stories about getting robbed, by all means, call the police. If you want to not get robbed, hire security.
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If you want to not get robbed, hire security.
That doesn't work. People steal things right in front of security guards.
Re: These are ultra high interest loans (Score:2)
That's not security. That's theater. It's intended as a deterrent.
Rule of thumb: if your "security" guard's wages would be affected by a $15 minimum wage, that's not actual security.
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ok by your definition you don't know of any apartment building in a major city that does hire their own security.
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Most of these are interest-free. I assume they make their money from merchants paying them a cut or allowing their use, or from late fees when people pay late. Affirm is the main one that does charge interest, and it can be quite high so that's one that's probably fitting for your scorn. Although I mostly still fall back on people should save up for big purchases and buy things when they can afford it instead of financing things they could pay off in a month or four.
Re:These are ultra high interest loans (Score:4, Informative)
Typically the interest accrues but it is forgiven if you pay the full original amount on time. If you don't, you're on the hook for interest back to day one. It's good deal if you pay it off on time.
Obviously enough people miss the payoff date to make this a profitable business.
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Equally obvious, they're hoping you miss a payment. It's not a big step from that to structuring payments to maximize the chances that you'll miss one.
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It doesn't surprise me these do well. I know a few people that have bought furniture and other house stuff and done this payment style. As you said, as long as you pay it off, you are basically getting an interest free loan. Nothing bad about that.
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Rehak said many scammers are stealing people's identities or taking over their accounts to evade detection, making unsuspecting victims foot the bill.
How's that river coming along? You should learn that the enemy of my enemy isn't my friend.
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Thing is, if companies stop lending money to the poor, people of a certain political persuasion start screaming that it's unfair and / or racist. If said companies raise the interest rates and fees associated with dealing with higher risk borrowers in order to offset that higher risk, people of a certain political persuasion start screaming that it's unfair and / or racist. They might even label covering that higher assumed risk "exploitative."
Calculating the statistical likelihood of a given borrower to
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Think about it -- they're depending on a certain percentage of people to not clear that debt in six months to offset the folks like me who say, "sure Synchrony Financial, I'll play with your money for six months interest-free" and pay the entire amount off via AutoPay the day before it's due.
The people like you don't matter. The interest cost to them on 6 months of money is negligible. You barely cost them anything.
What matters to them is the percentage of people who default versus the percentage of people who eventually pay it back with interest.
If the number of people defaulting exceed the amount of interest they are receiving then that is when they are in trouble.
The good news for them is most people eventually pay it back and plenty of them pay back a ton of interest too.
Scammers that inc
Is this even "tech news" (Score:3)
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In the old days doing this online wouldn't be possible, you'd get too much fraud and you'd give up after losing money. Now you can detect enough of the fraud to cover your losses with ultra high interest rates.
It's marketed as a good thing because poor people get credit, never mind asking why they're poor in the first place and in a position to be
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The platform itself is a bigger thief. (Score:5, Interesting)
These platforms game these metrics and "buy" revenue growth by looking the other way for fraud. The first order in your door dash like service is free. And you can create unlimited number of new accounts and keep getting new email ids or burner phones. They know and do just the minimal needed to keep game going.
These platforms know fraud is going on. But growth is more valuable that keeping fraud down. Every startup and in every filed knows much of their growth is fraudulent and unsustainable. Still they happily take the venture capital cash and hand it over to fraudsters and enrich themselves on insane valuations.
Steady leak of documents show how much platforms like Facebook were acutely aware of the damage they are causing to the society but they still go after revenue growth.
So it thieves stealing from thieves. That is all.
BNPL (Score:1)
Well there goes Pelosi's Build Back Better plan.
The article title is wrong. (Score:3)
The article does not actually say "How Fraudsters Exploit Popular Interest-free Payment Plans". It just says they are doing it. The examples they give are not actually fraud.
1: They say that the risk scores are different from other methods of purchasing on credit and people will use this one if they can use it and they can't use the others. That's not fraud, that's just looking for a working solution.
2: They say people used this service to buy products (PS5) and then resell them at a markup. That's not fraud, that's just business.
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It does say - they are engaging in identity theft and taking over accounts. Since they don't bother with credit checks, identity theft protection such as credit blocks don't work.
As for your second point - it specifically says what the fraud is. They buy a PS5 for $500, make the first of four $125 payments to get the product, and never pay the rest. That is fraud.