Every January, Point Predictive’s Chief Fraud Strategy Officer, Frank McKenna, assembles his team to start the annual fraud report. They pore over our unique lender-contributed Consortium data to analyze trends and shifts in loan application fraud and misrepresentation. And every year, new insights emerge. Accordingly, this year’s edition did not disappoint.
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Synthetic Identity Fraudsters Continue to Become More Sophisticated
Some fraudsters engage in synthetic identity fraud. They study and test the loan originations process to discover policy gaps and exploits. When they discover an exploit that works, they go all-in on those techniques until those gaps are filled. Once their tactics stop working, they simply find the next exploit. Evidence of this approach is clear from the methods of Social Security Number SSN manipulation that we observed in Consortium data.
Sale Price Discrepancies Imply Shenanigans with Down Payments
A phony down payment can clear approval by manipulating the vehicle’s final sale price. It is possible to do this by inflating the price of the vehicle in the financing contract. 18% of loan applications exhibit evidence of price inflation. Accordingly, fraud analysts should look for applications with a sale price that exceeds the advertised price of that vehicle on the dealer’s website. On first glance, sale price inflation may seem acceptable. However, it can add up to a lot of risk exposure for auto lenders.
Changes in Employment and Self-Employment Imply that Applicants Could Be Gaming the System
Proving steady income as a self-employed individual can be difficult. However, this difficulty is known amongst some borrowers. It’s no surprise: we’ve seen suspicious changes in employment status on the subsequent loan applications following an initial rejection.
Among auto loan applicants who had submitted multiple applications within a 30 day period, there was portion of those applicants whose employment status changed quickly. Since we assume that 43% of people who apply multiple times for loans don’t change from self-employment to a wage-earning employee. Therefore, as the workforce and the nature of work itself change in the coming months and years, we will see this trend continue to present risk to auto lenders.
This fraud report is 40 pages of fraud geekiness!
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