Frank McKenna, chief fraud strategist at Point Predictive, said on September 6 Automotive News nearly every dealer his company has spoken to reports more fraud.
“They tell us that their fraud rates have gone up quite significantly,” he said.
Retailers who have never seen fraud before are reporting multiple cases — and those incidents mostly end with indirect lenders forcing dealerships to buy back loans, he said. Buying out a loan can cost the dealership tens of thousands of dollars, a loss that would take several car sales to cover, he said.
“These dealerships are now impacted by a lot more of these,” McKenna said. “They are looking for ways to stop it.”
McKenna said these chargebacks come when lenders uncover identity theft, which he says has become more sophisticated. Fraudsters have “really good fake IDs” and “know everything about the customer”, he said.
This knowledge has reached the point where scammers can answer verification questions such as their victim’s residency in a given year and last car lender, McKenna said. He said fraudsters would get this information from sources such as Credit Karma.
Another growing trend in car loan fraud involves scammers creating a false identity rather than stealing an existing identity, a crime known as synthetic fraud.
“Synthetic fraudsters look like real people with excellent credit scores and established employment, which makes it very difficult to identify dealership personnel,” TransUnion senior vice president Satyan Merchant said in a statement. July press release.
Merchant said in January that the rate of synthetic fraud in auto loans increased nearly 30% from the first quarter of 2021.
“The incidence of synthetic fraud in auto loans has grown faster than any other financial sector as we emerge from the pandemic,” he said in a statement.
Another issue involves what Point Predictive calls “car fraud,” when consumers who need transportation lie about their income or employment to qualify for a car loan. Such lies can also arise in cases of “fraud for profit”, according to the company.