Over the years I have been asked this very question, in various ways, but the bottom line (no pun intended), has been:
Can I Be Charged With Fraud If I Misrepresent My Income For a Loan?
This question, as stated comes in many forms:
- I applied for a credit card and said I earn more than I do earn?
- I reduced my expenses for a loan application to get approved.
- I only receive benefits and stated this as wages and income for a loan.
- I am not working but stated I am on a loan application.
And the list of questions, can go on….but is this fraud?
Technically yes, but let’s look at it in more detail.
Underwriting and Due Diligence
When you apply for a loan, a credit card, any form of finance, the lender performs what they term an underwriting process. This is the process to make sure you qualify for the loan, and that you can repay the loan.
This is the lender’s responsibility to insure they will be repaid on their investment. That investment is your loan.
Now the question you may be asking, again….is, what if I state my income is (insert amount here) and it is not that amount, and I state my expenses are (insert amount here), and they are not that amount….what happens?
Nothing may happen. It is the lenders responsibility to verify, get evidence the numbers you provided are true.
So if you “fudge” things, or adjust the numbers and the lender does not verify them, is this fraud?
Technically, yes. But let’s look at in more detail.
Getting tired of reading that?
It is the responsibility of both the lender and the borrower to be truthful and factual in the application and underwriting process of a loan.
If you provide income and expense information, the lender could ask for proof or documentation of these numbers, but for many smaller loans or lines of credit (credit cards), they do not ask for proof.
The responsibility falls both ways, however, if a lender does not ask you to prove what you have stated, by showing a wage slip, bank statement, etc, they have failed on their end.
Is It a Crime? What Happens if I Default on The Loan?
Technically fraud is a crime, but it is highly doubtful for most small loans a lender is going to pursue some form of criminal legal action.
So should you be truthful on loan applications regarding income and expenses, yes!
However, there may be times when our figures or numbers are not exact, but we need to be as accurate as we can.