5 Takeaways from Point Predictive’s CarDealershipGuy Podcast

Point Predictive’s Chief Fraud Strategist, Frank McKenna, recently sat down with CarDealershipGuy, host of the eponymous CarDealershipGuy podcast. Here are five key takeaways from their conversation.

Industry-wide, 1 in 4 would-be borrowers misrepresent their income when applying for auto loans

In some markets, the ratio is higher, with some lenders seeing as many as 1 in 3 applicants overreporting their income. Inflated income figures often result in borrowers being approved for a loan they cannot afford, contributing to defaults.

Frank explains how Point Predictive’s integrations with loan origination systems give dealers access to data that can help identify income misrepresentation.

Synthetic Identity fraud is on the rise

Fraudsters are increasingly using a hodgepodge of real-world information to create fake identities that are used to purchase vehicles. Because this type of fraud cannot be tied back to any one victim, it can be difficult to track down fraudsters once they default on a loan.

While it takes many forms, perpetrators generally construct synthetic personas that are used to deceive financial institutions, enabling them to open fraudulent accounts and engage in various illicit activities while avoiding traditional identity verification measures.

Consumers are being duped by credit repair companies

Since COVID, so-called credit repair companies have rapidly proliferated. While they pose as legitimate companies, they generally sell their services to unsuspecting loan applicants and usually engage in some form of synthetic identity fraud. One common avenue is selling unwitting customers nine-digit “credit privacy numbers” that are just stolen social security numbers, making them accessories to synthetic identity fraud.

They also use credit washing, the practice of disputing legitimate transactions and debts as fraudulent in an attempt to remove them from a borrower’s credit report. Another common tactic is adding bogus tradelines to a consumer’s credit history — sometimes by claiming so-called “zombie debt.” In these cases, the credit repair companies reassign older repaid debts to subprime borrowers, making it seem like they have cleaner repayment histories.

PPP loans correlate with auto loan fraud

When Point Predictive examined the Chicago market, they found that 76 percent of synthetic identity fraudsters had previously received a COVID-era Paycheck Protection Program loan, suggesting that the rise in such auto loan fraud has replaced other financial fraud.

Auto loan fraud can sometimes be just one part of a more sophisticated criminal operation

While some subprime borrowers commit what Frank calls “fraud for car” to secure auto loan financing for which they otherwise would not qualify, more sophisticated groups are also cashing in on illegitimate borrowing practices. More common in the high-end market, fraud rings also operate complex schemes that involve securing cars with synthetic identities and selling them on the black market in China or Vietnam.

The conversation also touched on Frank’s background as a fraud investigator, some of the latest countermeasures the fraud detection industry is employing, and why Houston, Texas, is such a hotbed for auto loan fraud.