First party fraud – the crime of everyday life

At Cifas we’ve been tracking trends in first party trends over a number of years. Whether a false application for a mortgage, inflated insurance claims or chargeback fraud, our research makes clear that first party fraud is a growing problem and one which is increasingly normalised in society.  

In our 2023 annual ‘Fraud Behaviours’ report we surveyed 2,000 people in the UK to find out about their attitudes to first party fraud. Their responses were alarming; 12% (1 in 8) consumers admitted to committing some form of first party fraud in the previous 12 months – up from 10% in 2022 and 8% in 2021.  

Some of the results in relation specific types of first party fraud are particularly concerning. For example, 1 in 6 adults say that they, or someone they know, have misled mortgage companies about their annual salary and 1 in 20 have committed chargeback fraud, or knew someone who had. Worryingly, 14% of respondents did not think it was illegal to supply misleading information and 9% thought that this was ‘reasonable’ behaviour.   

Together with other supposedly ‘low-harm’ crimes – including income tax evasion, ‘cash in hand’ working and council tax fraud – these types of common place offending have been dubbed as the ‘crimes of everyday life’ by criminologist Susanne Karstedt. They are fast becoming a persistent characteristic of our society and are a sizeable and growing cost to the law-abiding majority, driving up prices and starving public services of much needed funds. 

What can we do about this from an industry and government level?  

The normalisation of first party fraud is a symptom of societal factors, about which we can do very little. It is a reflection of an increasingly atomised society and easy temptation inherent in digitalised lives. However, our research suggests that there are a number of points at which we can effectively intervene and reduce the cost of first party fraud. Our research tells us there is a ‘journey’ towards committing first party fraud, and understanding this helps identify some of the key points of intervention. The key stages on the journey include: 

• Knowledge – is this fraud? 

• Motivation – what is my reasoning for doing it? 

• Achievability – can I actually do it? 

• Justification – why is it okay for me to do it? 

• Consequences – what will happen and is it worth doing it? 

Clearly there is always more to be done by organisations to drive down the ‘achievability’ aspects of this crime, including strengthening internal controls and embedding cross-industry data-sharing in business models. However, there is much more that we can do collectively to address each four other stages to reduce this threat. 

Knowledge: Our research shows that many people simply don’t know that certain acts constitute ‘fraud’. One way we can tackle this is by delivering multi sector public awareness campaigns that make clear the consequences of first party fraud. 

Motivation and Justification: While it is impossible to track individual’s motivations, it is self-evident that the rising cost of living and pressure on household finances is a driving factor to the increase in fraud. 

Finding ways to ease the pressure on the most vulnerable consumers by taking a reasonable approach to credit management will help reduce motivations and first party fraud and undermine any potential benefit in committing it. 

Consequences: Some individuals will never respond to the interventions above. While a policing response to every instance of first party fraud is neither achievable nor desirable, the current state of play, in which there is no credible deterrent for persistent wrongdoing, is simply unsustainable.  

It is here where the type of cross-industry data and intelligence-sharing we facilitate at Cifas can come into play. Working across sectors, we supply good quality data and intelligence on the ‘highest harm’ individuals, shining a light on the most prolific offenders and enabling the better targeting of stretched resources. 

We ignore the growing evidence of fraud as an acceptable behaviour at our peril; it should be a call to arms. It cannot be right that the vast majority of us who abide by the law are forced to subsidise first party fraud through higher fees and costs. By acting collectively and developing a range of effective and integrated interventions as we do at Cifas, we can make the difference and ensure that these crimes and the harm they cause become less of an everyday occurrence. 

This is an edited version of an article originally featured in Credit Connect.