Toronto-based fraud prevention platform Lenders API has been acquired by Edmonton’s Trust Science, which helps lenders vet prospective borrowers with limited credit histories.
The Canadian FinTech companies claim that this deal, which was announced Tuesday, “creates Canada’s first industry-wide defence system against coordinated lending fraud.” The financial terms of the transaction were not disclosed.
“Lenders API was built with the industry, for the industry.”
Evan Chrapko, Trust Science
Lenders API was founded by Canadian Fintech newsletter’s Tal Schwartz and his father, Canadian Lenders Association (CLA) founder Gary Schwartz, who also lead FinTech-focused venture capital fund North Exit Ventures (formerly Exit North Ventures).
The father-son Schwartz duo launched Lenders API in collaboration with CLA’s small- and medium-sized business (SMB), consumer, and automotive finance members. Lenders API works directly with institutions in non-prime consumer credit, small business lending, and auto finance, helping participants detect coordinated lending fraud in real-time while keeping their proprietary customer data private through its consortium-based solution.
Coordinated lending fraud can include loan stacking, bust-out fraud, and synthetic identity schemes. Loan stacking entails securing multiple loans from different lenders simultaneously, often using the same collateral, with no intention of repayment.
Bust-out fraud involves groups that have established normal borrowing histories obtaining loans across institutions, immediately defaulting on them, and disappearing, whereas synthetic identity fraud refers to the use of fabricated or manipulated identities to fraudulently open accounts and secure loans.
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“No single lender can solve this problem alone,” Tal Schwartz said in a statement. “Loan stacking and organized fraud thrive in the gaps between institutions. The only effective response is shared intelligence delivered through a compliant, trusted infrastructure.”
Founded in 2014, Trust Science offers AI-powered risk and decisioning tech to financial institutions designed to help them make lending decisions with the help of alternative data and cashflow analytics.
In a statement, Gary Schwartz said, “Trust Science brings the scale, governance, and bank-grade compliance capabilities required to take [Lenders API] to the next level.”
Trust Science intends to integrate Lenders API into its AI-driven risk and decisioning infrastructure to help it prevent fraud, spot identity risks, and make credit decisions. Going forward, Lenders API’s platform will continue to help SMB, consumer, and auto lenders collaboratively spot fraud.
“Lenders API was built with the industry, for the industry,” Trust Science founder and CEO Evan Chrapko said in a statement. “Together, we will deliver a robust, real-time consortium solution that helps lenders protect consumers, reduce losses, and meet regulatory expectations at scale.”
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Feature image courtesy Lenders API.