Fraudulent auto loan applications have shot up $2 million per month since the beginning of the coronavirus pandemic, despite an overall decline in applications, according to PointPredictive.
“People are more desperate now than they’ve been in a long time,” said Frank McKenna, chief strategist at the risk management company. “They’re out of a job, dealerships are trying to sell cars because they’ve been locked down. In order to survive, there’s more desperation.”
While the number of total loans declined by 30% during pandemic shutdowns, analysts found that the rate of fraud cases increased by 25% during that period, according to McKenna.
“We’re seeing more borrowers use fabricated identities,” he said.
Synthetic identities are often constructed using a mix of authentic and fake information, such as a real name and fake social security numbers. In addition, borrowers frequently create fictitious jobs to falsely represent their income, McKenna noted.
Dealerships are also distorting details and adding additional nonexistent features to paperwork in order to increase the ticket price of vehicles, according to McKenna. These include adding a supercharged engine or upgraded stereo system.
There are 30 active lenders in PointPredictive’s consortium, McKenna said, with 20 more in testing stages. Nicholas Financial, a Clearwater, Fla.-based subprime lender, is the newest addition to the consortium.
“We have been working closely with the PointPredictive team for several months to fully understand their products and how they can help Nicholas immediately and in years to come,” said Doug Maron, president and chief executive of Nicholas Financial. “We are just now in the process of integrating it internally and rolling it out in our operations.”
PointPredictive’s tools will supplement products already in place, according to Marohn, and the partnership is just one more aspect of Nicholas’ overall strategy to identify potential fraud in future originations.
“In this day and age, and especially as we navigate through the pandemic and its aftermath, you can never be too careful on verifying the validity, amount and frequency of an applicant’s income,” Marohn said.
Originally published on Auto Finance News