Fake Pay Stubs: Easy to make; cost lenders millions

By Justin Hochmuth, Fraud Consultant

According to the 2022 Annual Fraud Report, income misrepresentation was responsible for more than $1.8 billion in loss exposure for automotive lenders in 2021. Twenty-nine lenders were surveyed as part of the development of the Fraud Report. Respondents indicated that income misrepresentation was their leading concern related to fraud types. Fake pay stubs are a growing threat to lenders. Advances in technology make them readily available and inexpensive to obtain. While many times fake pay stubs are related to fake employers, other times the applicant has a job but alters or fabricates their proof of income in an attempt to qualify for a higher-value auto loan. If the applicant does not make the income they report they make, that affordability gap often results in early payment defaults.

Technology Provides Tools for Misrepresentation with the Click of a Button

While fraud fighters have access to advances in technology, criminals do too. There are hundreds of websites that provide access to various fake pay stub formats. Some of these formats are easy to identify with a quick glance, however, some are difficult to distinguish from common payroll providers such as ADP, Intuit, Paychex, and Paycor. For instance, this website allows any user to be able to edit and create an ADP-style pay stub in just minutes. Many of these fake pay stub websites will also sell the add-on service of fake employment verification to go along with the fake pay stub.

For individuals that need a fake pay stub, but don’t have the confidence to utilize the many tools available online, they can easily reach out to individuals across social media for assistance. There are thousands of document creators that make their services available on platforms such as Facebook, Instagram, Telegram, and even Tik Tok. Auto Finance News recently conducted an investigative report in which they were able to obtain a fake identity that included a fake social security number (SSN), pay stub, and employment verification within a few hours.

The Impact

All these methods to obtain fake income and employment documentation make it hard for lenders to know who to trust. Income fraud is happening at such a high rate on auto loan applications and is compounded by the fact that fraudsters are not claiming ridiculously excessive salaries. They are lying just enough to get approved for the loan. Our Annual Fraud Report shows that the most frequently stated incomes that turned out to be untrue in the consortium were stated incomes between $30,000 and $72,000.

According to Kara Kules, Fraud Analyst for Point Predictive, “When a lender receives a suspicious pay stub, it takes additional time and resources to investigate. It also can lead to dealer relationship issues if they ask for stipulations to clear the suspicious pay stub. There are many websites actively creating fake pay stubs, and it is hard for lenders to stay ahead from a

training perspective. We regularly receive requests to review proof of income and even to the most trained eye, some of these fake pay stubs can be difficult to identify.”

How Lenders are Fighting Back

There are many solutions out there that offer various approaches to income fraud mitigation, however Point Predictive’s Auto ONE suite of fraud-fighting solutions offer the best, holistic approach to identify, flag, and prevent income risk from an application level to a dealer level.