With the automotive industry facing an unprecedented surge in loan fraud, dealerships are finding themselves at the front lines of a growing battle against sophisticated crime syndicates. In the early months of 2023, the creation of manufactured identities allowed fraudsters access to a staggering $1.8 billion in automotive loan credit, a significant leap from $869 million in the same timeframe in 2021. This escalation has not only highlighted the evolving threat landscape but has also prompted a rapid development in fraud protection technologies by leading companies like Experian, Equifax, Cox Automotive, and 700 Credit.[1]
Understanding the Threat: Synthetic Identities - Synthetic identities pose a major challenge to the automotive finance market. By combining real information such as names, addresses, and Social Security numbers from various sources, criminals are able to create fake personas that appear creditworthy on paper. These fabricated identities are the tools of choice for sophisticated crime syndicates, which have grown both in numbers and in the complexity of their operations over the past two years. The vehicles purchased under these false pretenses often end up being shipped across international borders, complicating efforts to track and apprehend those responsible.
Spotting the Red Flags - Dealerships are on the frontline of detecting potential fraud, with several indicators that can signal a fraudulent transaction. Unusual behaviors, such as a customer's willingness to purchase every available add-on without hesitation, the absence of a driver's license, or a phone number that doesn't match the provided Social Security number, can all be red flags. However, recognizing these signs requires a vigilant and well-trained dealership staff, capable of distinguishing between legitimate customers and fraudsters who often present themselves with seemingly good credit profiles.
Combating Fraud with Technology and Training - In response to the rising tide of automotive loan fraud, several finance companies have unveiled advanced tools aimed at helping dealerships safeguard against deceitful practices. Innovations like 700 Credit's driver's license mobile verification scanner and Experian's Fraud Protect identity verification process represent critical steps forward in the fight against fraud. Yet, technology alone is not enough; comprehensive staff training is essential to ensure that dealership employees are not only aware of the potential for fraud but are also equipped to act on the digital tools' warnings. As the industry continues to grapple with this issue, the balance between sales goals and fraud prevention remains a pivotal focus for dealerships nationwide.
This article is presented at no charge for educational and informational purposes only.
Red Sky Alliance is a Cyber Threat Analysis and Intelligence Service organization. For questions, comments or assistance, please contact the office directly at 1-844-492-7225, or feedback@redskyalliance.com
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[1] https://bnnbreaking.com/finance-nav/business/rise-in-auto-loan-fraud-dealers-face-18-billion-threat-in-2023
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