In which fraud scheme do borrowers pledge the same collateral to different lenders without disclosing it?

Double-pledging collateral refers to the fraudulent act where borrowers use the same asset as security for loans from multiple lenders without informing them. This scheme exploits the lack of communication or scrutiny among lenders to gain access to funds while putting up the same collateral.

The underlying principle of this fraud scheme is that borrowers may attempt to secure more loans than their actual collateral can support. By providing the same asset to multiple lenders and not disclosing this fact, the borrower misleads each lender into believing they have a first-position claim on the collateral. If the borrower defaults, the lenders may find themselves in a position where multiple parties are claiming rights to the same asset, often resulting in complicated legal disputes and financial losses.

In contrast, the other options do not specifically address this scheme. Residential loan fraud typically involves misrepresenting information on a mortgage application. Credit data blocking refers to manipulating one’s credit history to hide negative information when applying for credit, while reciprocal loan arrangements deal with the practice where two parties lend to each other without any cash flow but can involve legitimate transactions or arrangements hence not fitting the specific definition of misusing collateral. Therefore, the most accurate term that describes the action of pledging the same collateral to different lenders without disclosure is double-pled