How Kapitus Prevents Fraud with Tax Guard Published May 30, 2023
Fraudsters Present A Big-Time Concern For Small Business Lenders
Kapitus, a small business lender based in Arlington, Virginia, needed assistance in reliably identifying applicant tax debts. The need to collect tax transcripts to verify borrower information and prevent potential loan fraud was top of mind for this lender.
Countering attempted fraud isn’t just a concern for Kapitus—it’s a fundamental concern for all savvy lenders. “In our industry, we see a lot of fraud. It is fairly easy to doctor a tax return,” said Steven Podhorzer, Senior Vice President of Underwriting at Kapitus.
Fraudsters are becoming increasingly sophisticated, developing schemes that are difficult to catch with standard underwriting techniques that rely on conventional data sources, like basic tax returns. McKinsey has called synthetic identity theft (a common type of fraud where scammers piece together a fake identity and false documents using a real, stolen SSN and a fake name), “a ticking time bomb” for lenders. In today’s information age, it’s all too easy for bad actors to create fake tax returns, bank statements, and other records, and all too easy for these to slip past lenders.
“There were times we would call to verify line items that looked suspicious, but those were rare instances. We didn’t have any direct access to IRS records,” said Mr. Podhorzer. Kapitus needed a solution that could provide them with a direct line to the IRS and allow them to easily review comprehensive tax transcripts, verify the applicant’s identity, and identify any hidden tax debts.
The Tax Guard Solution To Stop Loan Fraud in Its Tracks
Kapitus partnered with Tax Guard to enhance tax debt identification and tax transcript reporting capabilities. “Tax Guard is able to provide us with recent, up-to-date information directly from the IRS. Any time we cross reference and find fraud, Tax Guard has saved us enormous amounts of money,” Mr. Podhorzer said.
Thanks to Tax Guard, Kapitus has improved its underwriting process and reduced instances of fraud, ultimately saving the team time and money. With Tax Guard, Kapitus can access IRS records the next day, or even the day they request them. “There are so many cases where we see nothing on our initial background check. Then we run it through Tax Guard, and we see all that negative information. I have no doubt during our history there were merchants we funded that we would have said no to if we had the same information that Tax Guard provides us,” said Mr. Podhorzer.
Tax fraud isn’t going to stop anytime soon. In fact, the Identity Theft Resource Center reports that 2021 saw a 68% increase in data compromises compared to 2020. As scammers rely more heavily on other people’s data, lenders need to be able to defend their underwriting process with access to revelatory, real-time tax data. While criminals can fabricate fake tax returns, they aren’t going to voluntarily pay thousands of dollars in payroll taxes just to establish a fake identity.
Tax Guard enabled a more straightforward, competitive loan application process for Kapitus while providing a high degree of protection. Mr. Podhorzer, with the last word:
“I highly recommend Tax Guard. I would say it is very helpful for protecting against fraud and giving you up-to-date information. They provide information that you can really trust. I give Tax Guard my 100% recommendation.”
To read the full Kapitus case study and learn how we’ve helped thousands of other lenders like you, check out the Tax Guard Resources page.
