With the demand for automotive sales moving from in-person to online, the need for fraud prevention methods is also increasing. In fact, according to a recent study by GIACT, 85% of car shoppers are more likely to buy from particular dealerships that will allow them to start or complete nearly all of their vehicle purchases online.
Due to this massive shift to online purchasing, a wide range of opportunities have opened up for fraudsters to steal from automotive dealers. Fraud in the automotive industry can be as easy as a few credit card scams.
Since the cost of a car exceeds most credit limits, fraudsters can yield a significantly larger income by committing automotive fraud. In 2018, the estimated auto loan fraud resulted in a loss of approximately $226 million dollars. Identity theft in the automotive industry can happen many different ways but the most common forms include:
True Name Fraud
Lax Fraud Controls
Being knowledgeable about these types of fraud can help dealerships prevent it from happening. Here’s what you need to know:
1. Synthetic Identities
One of the fastest growing forms of identity theft in the U.S. is synthetic identities. Synthetic identities comprises 80% of all new account fraud and 20% of all credit card losses.
Synthetic fraud uses fake personally identifiable information to create new credit profiles and apply for loans. Fraudsters can then purchase high priced items, such as cars, with no intention of actually paying them off. They get away with this so easily by using fake or children's social security numbers that way it will go undetected for a long time. Since synthetic identities are difficult to identify, fraudsters can often slip passed unsophisticated fraud prevention tactics.
2. True Name Fraud
Unlike synthetic fraud, true name fraud uses real information to apply for loans and make large purchases. True name fraud occurs when a fraudster uses stolen identity documents to claim to be another person with better credit so they can take out a loan in their name.
After they use a stolen identity they will then offload the vehicle to other fraudsters to liquidate and ship overseas. Once a vehicle is acquired by a fraudster and removed from the dealership it is a lot less likely for them to get the car or the payments back.
These fraudsters will use a stolen drivers license along with the knowledge of their social security number, making it easy for them to commit true name fraud. With enhanced due diligence platforms, dealerships can prevent fraud before they can successfully steal a vehicle.
3. Lax Fraud Controls
Lax fraud controls make committing fraud a lot easier. In this case, the dealerships are the victims of themselves, in the sense that they have built a reputation for having lax fraud controls. Once the dealership has earned this reputation of having lax fraud controls, they become a large and easy target for fraudsters.
Having lax fraud controls can make the dealerships liable if their “Know Your Customers” systems don’t prevent fraud and have limited ability to push back. When a loan defaults, the lenders will investigate the application that the dealership gave to the fraudster and if there are obvious signs of fraud that the dealership did not catch, then those loans could land on the dealer for buyback.
4. Document Fraud
Document fraud can be easier to catch if the dealership takes the time to check all the information carefully. Document fraud happens when someone falsifies information for the benefit of obtaining a vehicle while also being less traceable.
Fraudsters do this by inflating their income or the stability of their residence in the "Know Your Customer" documentation that they submit to the dealership. This gives them a heightened credit limit than they would otherwise get and helps them receive loans at lower rates. This can be better prevented if you have proper security measures for your dealership.
Intellicheck Can Help
When fraud is committed against your dealership it can be very time consuming and cost a lot of money in loan buyback and lost income. Having an ID authentication at your side can easily help you catch fraud before it’s too late. Intellicheck has great solutions for both in-person and online transactions to prevent fraud.
Intellicheck saves you time by preventing fraud from happening. Intellicheck will reduce the risk of missed fraudsters while being easy to use and integrate into the dealership's systems. Want to learn more about how Intellicheck can protect your dealership from automotive fraud?