The Common Fraud Trends Auto Lenders Must Be Aware of in 2019

Just like many other things, experts believe that auto finance fraud has also evolved over some time. With rapid technological advancement, fraudsters have become far more innovative. This implies that the automobile lending organizations need to take innovative measures to safeguard themselves. You cannot depend solely on examining a driver’s license today for verifying somebody’s identity. We find that auto lenders are perpetually wondering if they are dealing with genuine people or are they fraudsters. They are forever worried if the car loan applicants or borrowers at all have the intention of repaying the loan.

We understand that legitimate consumers and even fraudsters have multiple avenues through which they could initiate a car purchase and each one would be coming with diverse challenges for an auto lender or dealership to navigate and that necessitates quick decision-making. There are numerous forms and types of automobile finance fraud that could make things unbelievably difficult for flagging suspicious transactions. As per PointPredictive, in only 2019, as many as $6 billion auto loan originations maybe containing misrepresentations that could lead to serious problems for all the auto lenders across the United States.

As per https://forbes.com, we understand that one of the major reasons why auto lending fraud seems to have escalated in the United States could be because of the inherent nature of the current auto loan process. Consumers are not required to work or interact directly with the car loan lender instead they are often dealing with an intermediary – this system could be inviting trouble for lenders as it gives opportunities for fraudsters. Most auto lenders firmly believe and claim that both car dealers and consumers are responsible for perpetrating the fraud experienced by them.

Every year around 85 percent of vehicle purchases in the U.S.A. involves a loan. Presently more than 107 million Americans are having auto loans and we know that car dealers are in the habit of working directly with auto lenders for facilitating most of those auto loans. All these loans could be targeted by fraudsters.

As per PointPredictive, in an auto lending survey performed in 2018, auto lenders pointed out that as much as 70 percent of all their fraud losses might have been facilitated or perpetuated by the car dealer and the rest of the cases by consumers. Often defaulting consumers are not aware and are shocked to find the kind of information provided on the application. In a majority of the cases, the auto dealer was simply making an effort for getting the deal done as the car dealers are intimately acquainted with the precise policies followed by the auto lenders. Car dealers are caught coaching or guiding borrowers about ways to get auto loan approval. Let us explore some of the current auto lending fraud trends.

Ever-Increasing Synthetic Identity Fraud

Synthetic identity would be combining numerous credentials for fabricating an identity for someone who is non-existent. A valid or legitimate Social Security Number in combination with fabricated PII or Personally Identifiable Information, employer, address, and some other attributes go a long way in creating the synthetic persona. Superficially, the profile looks legitimate; however, after meticulous evaluation and thorough verification of all the attributes, one could notice hidden or subtle inconsistencies. We know that synthetic identities are often utilized for falsely presenting a consumer’s creditworthiness. Utilizing a genuine identity, modifications are made to a person’s Social Security Number along with some other applicant attributes. Fraudsters are motivated to adopt this approach simply because they wanted to hide from the auto lenders, the consumer’s bad credit history. Even though fraudulent, the person concerned feels that would be the only way he could obtain an auto loan that he intends to repay. However, for auto lenders, this seriously is a risk that is best avoided.

Synthetic Identity fraud has been rising from 2018 and it continues to dominate the auto lending scenario in 2019. Data research and statistics reveal that this is a critical issue that simply cannot be undermined or ignored. If statistics were to be believed around 20 percent of some lenders-fraud-associated defaults could have been caused by fraudsters who were using synthetic or stolen identities. Moreover, it was reported by TransUnion that as many as $600 million of car loans they have already analyzed contain some distinctive synthetic identity patterns. Experts believe that this fraudulent trend would be continuing and auto lenders must be serious about identifying them. Reputed organizations such as https://www.nationaldebtrelief.com/ are well-equipped to tackle such fraudulent practices and provide seamless lending solutions.

Income Misrepresentation

Faking pay stubs seems to be easy. Are you looking for a pay stub that displays year-to-date and weekly income, 401(k) contributions, and deductions? You could come across dozens of websites that are regarded as pay sub generators. You simply need a PayPal account or a credit card. False verification of your employment could be arranged effortlessly. In this context, the reference could be supported by any false or fraudulent company website, fax number, email address, supervisor references or even a personalized LinkedIn applicant profile. Statistics reveal that as much as 33 percent of the auto loan applications are impacted by this fraud. Income still happens to be a major problem for auto lenders across the industry.

Phantom Loan Schemes

Auto lenders in the United States are reporting an increase in the incidence of Phantom Auto Loans which involve sellers and borrowers conspiring with each other for creating fake loan transactions. In many cases, the culprits are some unscrupulous dealers who pass off cars that do not exist in reality and some other cases where the auto loans seem to be private seller transactions.

So we see that phantom auto loans seem to be a kind of fraud where cheats work together for fabricating a car loan where no sale of any vehicle takes place. In such cases, the vehicle is never sold; however, the auto lender ends up providing the loan to the third-party or the dealer since the sender has received misleading and false information that in reality, a vehicle has been sold.

Conclusion: Seeking Assistance from Machine Learning & AI (Artificial Intelligence)

Machine learning is used effectively for tackling the issue of auto lending frauds for the past few years. Since machine learning could help in applying thousands of calculations every second that seems to be the most effective technique for revealing statistical deviations that act as the key indicators of fraudulent behavior.