Borrowers have been using loan stacking to mislead banks as to their actual creditworthiness
Following analysis of anonymised consumer loan data, the Bank of Slovenia has identified cases of fraud where certain borrowers have agreed multiple loans at different banks over a very short time scale, concealing their borrowing from the other banks involved. In this way they have abused the current regulations that require banks to report on changes in holdings of personal debt within three days. In some cases these borrowers have misled the banks with regard to their creditworthiness. The Bank of Slovenia emphasises that loan stacking of this type, although the total value does not represent a risk to the stability of the financial system, is misconduct with elements of a criminal offence. We have informed the police and the commercial banks of our findings. Updated rules for exchanging information on personal debt have also been adopted, and as of 1 March 2019 they require new data to be reported immediately.
In response to suspected fraud, the Bank of Slovenia conducted analysis of anonymised data from SISBON, a data exchange system for personal debt holdings that it operates. We found that there were several cases of misuse of SISBON in 2017 and 2018, where borrowing by certain individuals exceeded their creditworthiness.
Under the Consumer Credit Act, creditors (banks) are required to assess a borrower’s creditworthiness before concluding any loan agreement. A search of SISBON is part of any assessment of creditworthiness. Under the current regulations, banks (and other SISBON members) are required to report data to the system within three working days of any change. This time lag has been exploited by individuals for the purposes of fraud and deception, where they have taken multiple loans at different banks on the same day (or within the period of three working days). In so doing they have misled the bank as to their actual outgoings and net worth, and their actual creditworthiness.
At the Bank of Slovenia we should emphasise that borrowers are obliged to provide accurate and complete information about their finances and assets. Taking multiple loans at different banks and concealing borrowing at another bank that is not yet entered in SISBON is bank fraud, and could constitute elements of a criminal offence on the part of the borrower.
We have already informed the police and the commercial banks of our findings. Updated rules entered into force for SISBON: as of 1 March 2019 banks are required to immediately report any change in data. The period of three working days is thus being eliminated, which in our judgment will be the first step in reducing fraud of this type.