Challenges and Risks with Consumer-Permissioned Verification

Lenders need to ensure they choose a verification method that gives them access to the information they need to help them make more informed lending decisions.

Challenges and Potential Risks with Verifications Requiring Consumer Credentials  

Lenders today have more choices than ever when it comes to how they verify a potential borrower’s employment or income as part of the loan origination process. It is hard to believe that in today’s digital era, some lenders still rely on the “old school” practice of collecting documents such as a paystub or W- 2 directly from the applicant. That can put undue burden on consumers to access, find and then upload - or worse, post mail - that information to the lender. 

It can also be precarious as lenders that use this method make themselves vulnerable to potentially misrepresented, fake or fraudulent documents as it can be relatively easy to create false paystubs in a matter of minutes. 

To counter this, some lenders are considering options that ask consumers to authorize use of their payroll provider login credentials as a way for such lenders to gain access to payroll records. 

While on the surface it may seem to offer efficiencies, in reality it can introduce friction for the consumer (borrower) and the lender alike. For example, similar to the hassle of tracking down paystub or W-2 documents, consumers may need to determine who manages their employer’s payroll, know the credentials to access their records with that provider, and then be willing to share this personal and sensitive login information with the lender. Additionally, by introducing a consumer’s payroll login credentials to another party, it can also add potential risk for the employee, employer, and the payroll provider that could become a liability.

Something else to consider when it comes to mortgage verifications is that lenders require verification of more than just the borrower’s current payroll period. They may need access to both current and historical employment and income information. For example, generally, a mortgage lender will require at least 24 months of employment and income history and a pre-employment verification may require as much as three, five or even seven years of prior employment history. 

To truly gain meaningful efficiencies, mitigate potential delinquency and default risk and have a more holistic view of applicants, lenders would benefit from a digital verification solution that provides automated and secure income and employment verifications. With real-time access to income and employment information, lenders gain access to a process with less friction that fits seamlessly into their workflow, while also providing a more comprehensive employment and income history of their borrowers.

With all the options lenders have today, they need to ensure they choose a method that gives them access to the information they need to help them make more informed lending decisions while balancing the equally important need to provide a positive customer experience.