Auto loan fraud is one of the fastest-growing forms of fraud in the United States. According to Point Predictive’s 2022 Auto Fraud Trends Report, auto loan fraud topped $7.7 billion in 2021 – and is up 267% since Point Predictive began tracking auto loan fraud in 2010.
At the core of this is an uptick in synthetic identity fraud, where thieves combine real and fake information to create a unique – but false – identity. This “Frankenstein fraud” allows people to build real credit scores, making them incredibly difficult to differentiate from real identities. The Federal Trade Commission estimates that synthetic identity fraud now accounts for 80-85% of all identity fraud.
In the auto space, this type of fraud makes it increasingly difficult for dealerships to validate consumer identity, vet their creditworthiness and complete the sales process in a timely manner, while having the confidence they need to watch the car drive off the lot.
And dealers these days have the most to lose from fraud. Many lenders now require dealers to buy back deals related to identity theft. One oversight could become a six-figure mistake. It’s crucial that dealers position themselves to stay ahead of ever-changing fraud trends. Here are several ways your dealership can do just that.
More than one-third of consumers have some kind of discrepancy on their credit reports. These errors can range from incidents of identity theft to mistakes between people that share common names or similar social security numbers. With such prevalence in errors, it’s not uncommon for a buyer’s credit report to reflect information that doesn’t quite match up. It’s these exact imperfections that fraudsters will try to leverage.
Most consumers have a handle on their credit history, and if something is wrong, they’re able to effectively communicate what exactly is wrong and why. If you notice a discrepancy, don’t assume. Exercise due diligence to determine if the explanation is worth the risk.
And if you see several credit inquiries in the span of a few days, that typically hints at trouble. Even the most fervent car shopper is unlikely to allow each dealership to run a hard inquiry on their credit history. However, someone committing fraud may press for multiple credit inquiries to see if they can sneak their way into being perceived as a credible buyer.
Fraudsters are constantly honing their craft. That’s why it’s important that your business keeps an ear to the ground for solutions that help you offer a robust and secure purchase process.
The great thing about technology is constantly evolving, and as more transactions become fully digital, so do the solutions that ensure their compliance and integrity.For example, identity verification is a key component of any notarization, and many dealers already require the notarization of limited powers of attorney to be able to register the title on behalf of the buyer. Online notarization validates signer identity, captures the signer’s ID, records the entire notary session and provides a comprehensive audit trail that’s readily available to your dealership. These safeguards help deter fraudulent activity, and are helpful should any concern about transaction integrity arise.
While you should embrace technology and automated processes to help your business, you should never exclusively rely on it. Proper fraud mitigation is a mix of technology and manual processes that work together to protect your business and your customers.