“Credit muling” is a relatively new form of fraud that’s been quietly affecting a growing number of retailers. Credit muling is when merchants offer products or accounts to customers use their own, real, identity -- since customers are using their own, authentic, information, it’s extremely difficult for merchants to prevent the fraudulent transaction.
This type of fraud has been increasing with mobile phone sales, according to numerous studies. Here’s how it happens:
Credit muling can be a disaster for merchants and customers alike. Since the customer is using his or her identity, they will most likely pass a traditional credit and fraud check, since the targeted victims don’t have a long credit history. Merchants typically write this off as “Never Pay” losses, chalking up unpaid phone bills and expensive smartphones as permanent losses.
For customers, the contract is completely legitimate and they’ll be on the hook for the device and the contract’s plan, which could add up to lot. Most smartphones, like the iPhone 6, cost $650 off-contract. Not only that, but they’ll need to pay for the contract’s termination fee, which is about $250.
Another form of credit muling is when customers intentionally go into a retailer's store and sign a 2-year contract for high-end smartphones, using stolen identities. Similarly, fraudsters also engaged in “account takeover,” to add new phone lines on existing contracts. The phones would then be sold on the black market, unlocked, for a substantial gain. As Forbes wrote, this is a massive issue for retailers that has resulted in millions in fraud.
This kind of fraud is difficult for merchants to protect against. Trustev’s technology can help and already has assisted retailers like Radioshack to combat credit muling fraud in smartphone sales.