Synthetic identity fraud is wreaking havoc on the auto lending industry, with a staggering $7.9 billion in losses reported in 2023, marking a 98% increase in attempts. Point Predictive’s study highlights that nearly 75% of the risks faced by auto lenders stem from income and employment misrepresentation, synthetic identities, and credit washing. While identity theft accounted for 14% of all risk, it’s just a fraction of the challenges confronting lenders, as fraudulent activities associated with first-party borrowers are on the rise.
The proliferation of online application processes in the lending sector has exposed lenders to a myriad of risks, including fake identities, fraudulent services, and application bots. Moreover, sophisticated credit repair schemes, such as credit washing and the sale of fake primary tradelines, are adding to the industry’s woes. Synthetic identity fraud has become increasingly prevalent, with the average attempt rate reaching 83 basis points by the end of 2023, driven by factors like the growing use of stolen identities and the allure of high credit limits in the online auto loan market.
Credit washing, a practice where all negative tradelines on a credit report are disputed as identity theft, remains a persistent problem in the industry. Additionally, borrowers inflate their income or fabricate employment details, while fraudsters establish fake companies to validate false employment claims. The report identifies over 11,000 fake employers circulating within the industry, resulting in a significant percentage of loans being charged off due to borrowers’ failure to repay.
Dark web trends further exacerbate the situation, with platforms offering fraudulent services like premade CPNs and counterfeit paystubs for as low as $150. The emergence of premade CPNs, aged for three years and tailored to bypass lenders’ detection systems, has become a lucrative venture for scammers. Telegram channels have become hotspots for these fraudulent activities, with premade CPNs fetching as high as $750, facilitating the proliferation of synthetic identity theft and auto lending fraud.
