In the fintech and banking world, a Credit Privacy Number (CPN) is as uniquely American as hamburgers and hot dogs on the Fourth of July.
Credit repair companies in the U.S. created this nine-digit number as a marketing gimmick to sell consumers stolen Social Security numbers under the guise of protecting their privacy. In reality, however, these numbers have fueled a far more sinister purpose — creating millions of synthetic identities.
Nowhere else in the world does the concept of a CPN exist. And nowhere else do synthetic identities run as rampantly as they do here. In America, CPNs and synthetic identity fraud go hand in hand.
The Great Big CPN Lie
It’s hard to tell precisely when the CPN scam started. However, credit repair companies, looking to generate income by preying on consumers’ desperation to hide bad credit, first mentioned it as a solution online in 2007.
The CPN was merely a modern rebrand of “File Segregation,” a credit repair scheme that gained popularity in the 1990’s by people that had declared bankruptcy. That scheme involved using a new mailing address and phone number alongside an Employer Identification Number (EIN)– instead of an SSN– on a credit application. As a result, credit reporting agencies were tricked into starting a pristine new credit file for the person.
Using a CPN followed the same process with one big exception: Instead of using an EIN, the credit repair companies used a stolen social security number and packaged it with an air of legitimacy. After all, using a CPN wasn’t fraud; it was a way to protect privacy. Desperate and gullible consumers fell for it hook, line, and sinker.
Criminals And Law Abiding Citizens Use CPN’s
Barbara Simcox, an expert in synthetic identity, held fraud investigator stints with Chase, Bank of America, and MBNA during the formative years when the synthetic problem was just emerging in the US. At the time, she had a front-row seat to the scam and saw it go from bad to worse each year. She said in 2010, CPNs were popping up seemingly everywhere: Craigslist, BackPage, and YouTube. By 2015, it got worse: CPN use exploded, and shady credit repair companies were minting money.
CPNs can sell for as much as $1,500 each. One prominent seller online advertises “legal” CPNs for $79 to $200, claiming to have served more than 1 million clients in the last 16 years.
Simcox believes CPNs went viral because they appealed to criminals and law abiding citizens alike.
“I saw criminals who specialized in traditional identity theft discover that using CPNs were more lucrative and valuable to further other criminal activities, Simcox says, “It also provided people in financial distress or having trouble getting credit a way to move forward and get cars, apartments and loans.”
A Boom in Synthetic Identities Across Every Industry
Nearly two decades after they first appeared, CPNs have now become rocket fuel for synthetic identity fraud and a significant contributor to business charge-off losses. According to Datos Insights, synthetic identity fraud likely resulted in $2.4 billion in unsecured credit losses in the U.S. last year alone.
TransUnion, which examined the risk exposure of auto loans, personal loans and credit cards, says lending exposure due to synthetic identities is at an all-time high — hitting $3.2 billion for the first half of 2024, an increase of nearly 70% since 2019.
Socure, an identity fraud prevention company, says the fake profiles are not just limited to credit products. The company estimates that as many as 3% of all bank accounts in the U.S. — approximately 5 million — are synthetic.
And while these estimates paint a grim picture, they just might be the tip of the iceberg. Deloitte Center for Financial Services says synthetic identity losses will hit $23 billion annually by 2030.
The CPN Boom May Just Be Winding Up
Synthetic identity fraud may be shaping up to get far worse before it gets better. An analysis of mentions of the term “CPN” on the top 25 Telegram fraud channels over the last three years reveals a surging interest in purchasing and selling the numbers to open new accounts, rent apartments and get car loans.
In 2024, conversations about CPNs have increased by more than 300% on those forums.
A Crime Your Friendly Neighbor Might Do
“The problem with CPN’s is that there are some people that truly have no idea that they are committing a crime”, says Steve Lenderman Head of Fraud Solutions for Quantexa. “They are being solicited by their friends on social media to use them, or even in their church groups so they think they are ok. It’s the kind of crime your friendly neighbor might do and not even realize it.”
It’s that ambiguity around the legality of CPN’s that seems to keep them popular.
However, to Sgt. Darren Schlosser, with the fraud unit of the Houston Police Department, there is no ambiguity. “Using a CPN on a credit application is 100% a crime, he says, “If a consumer puts their CPN on an application instead of their real social security number, they could face the consequences. Here in Texas, it’s a crime and we’ll proceed accordingly”
Most Synthetic Identities Are Real People Using CPNs
According to SentiLink, most synthetic identities are actually genuine people who cross the line into committing first-party fraud.
In a recent whitepaper, the company estimates that 70% of all synthetic identity cases appear to be real people using their actual name and date of birth to establish new credit files, something it attributes in part to illegal tactics like the use of CPNs and other fraudulent credit repair tactics.
Fintech’s As A Gateway To Bolster CPN Profiles
Making those CPN profiles appear more genuine can be tricky, so sellers often instruct buyers on ways to add tradelines to their new credit files. For that, they often exploit fintechs.
Credit builder products from fintechs like Self, Kikoff, TomoCredit, Chime and others have helped millions of people build their credit when they don’t have any or have very thin files. But these products can also provide perfect cover for CPN users, who often share these same characteristics.
A self-proclaimed “credit repair guru” recently posted a video on this topic. “You have to build your profile with primary tradelines,” she says. “And the best way to do that is with a CPN-friendly credit builder product. You can get a small tradeline, and it will boost your credit score within a month.”
Being known as CPN-friendly is a bad thing. According to Steve Lenderman, it means you’re a target. “Some fintech credit builder products can become hotbeds to seed synthetics.” He says, “The lower KYC requirements at some and the lack of experience contribute to them becoming easy targets.”
Fast Money, Fast Fraud
Mary Ann Miller, a a vice president, evangelist and fraud executive advisor at Prove, is unsurprised that CPN users and synthetic identities often hit fintechs. She indicates that using fake profiles to open new accounts flourished during the pandemic when individuals used identity theft and synthetic identities to receive or launder fraudulently obtained PPP loans or unemployment benefits.
“In the fintech world, fast growth can come with fast fraud too,” Miller says. “Scammers will push consumers who buy their CPNs to get accounts with those fast-growing fintechs that don’t have robust identity controls to stop fake profiles.”
So will the CPN boom ever end? “It’s not something I would bet on,” Miller says. “We’re going to have to get more aggressive in blocking people using them from getting approved. Until then, it will likely keep spreading.”
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