Fraud in the automotive industry can cost dealerships hundreds of thousands of dollars. Unfortunately for these dealerships, automotive lenders are now trying to make the dealerships shoulder the responsibility for fraud related losses, which leaves dealerships to absorb the detrimental costs.
In many automotive fraud cases, fraudsters will submit fraudulent documents that help them receive a higher credit limit at a lower interest rate. They may also plan to steal a vehicle without any intent to make payments at all. In these instances, fraudsters may pose as a strong applicant with a solid credit history with their sole goal being to drive the vehicle off the lot. Once the vehicle has left the dealership then the likelihood of recovering the losses is far lower.
Some of the most commonly forged documents dealerships need to watch out for include fake IDs, true name fraud, misrepresented income, and stacked loans. Getting to know these forms of fraud can help prevent them and save the dealership money.
One of the most common forms of fraud in the automotive sector occurs when fraudsters use fake IDs to apply for car loans. Synthetic identity fraud is one of the fastest growing types of fraud with dealerships and is incredibly difficult to catch and prevent.
In synthetic identity cases, fraudsters combine real information with fake information to create a unique identity that does not actually exist. They may use a children’s social security numbers along with a fake name, which allows fraud to go undetected for years until that child is applying for their first credit card.
Fraudsters will rely on fake IDs to finalize financing, rentals, and leasing agreements with no intent to ever repay what they have borrowed.
Another very common form of fraud in the automotive industry is true name fraud. True name fraud is an instance in which a fraudster will apply for a loan using somebody else’s real information, including the SSN, name, address, date of birth and other information included on your personal identification documents.
True name fraud commonly occurs between close friends or family who can easily fill out the “Know Your Customer” information to bypass initial security measures. When this kind of fraud happens and it is someone you know then it is also considered “Familiar Fraud”.
According to the Javelin Research and Strategy’s Identity Fraud Report, about 847,000 of true name/familiar fraud victims actually knew their thief. True name fraud is a major risk for automotive dealers and can be tricky to catch if the buyer has a decently made fake ID. In fact, many fake ID producers advertise their products by claiming their IDs are scannable and able to pass any security tests allowing fraudsters to shop and carry out day to day activities without triggering any red flags.
It’s not uncommon to see fraudsters misrepresent their income by inflating how much they actually make to qualify for an automotive loan. They may also claim a second income or even lie about their actual employer to disguise their income. Without a proper process for verifying this information
In an attempt to dismiss suspicion of false activity, buyers may provide fake bank statements or pay stubs to falsify their bank balances or deposits on their loan applications.
Loan stacking occurs when a buyer applies for multiple car loans before the bureau has a chance to update their credit history. Fraudsters do not use loans to refinance other loans but instead take out multiple loans at once.
The objective is to get as many auto loans as possible before they are detected, also known as a “bust out”. This can result in a negative cycle of debt and make it hard for dealerships to pay back each loan. Being able to catch this type of fraud could save dealerships a lot of money.
Protect Your Dealership with Intellicheck
In many of these instances of forged identity documents in car sales, fraudsters will use a false identity or represent false information to present like a more legitimate candidate. Backing your dealership’s internal fraud controls with an ID authentication solution will dramatically help you improve your bottom line and reduce instances of fraud.
Intellicheck provides great solutions for in-person and online transactions to prevent fraud. Intellicheck is incredibly easy to use and integrate into any dealership’s systems. It will save a lot of time and money by catching and preventing fraud before it happens. Not to mention, it will save you from all the headaches from dealing with the aftermath of fraud.