Dealers, have your stores ever let enthusiasm for a sale outweigh their desire to complete due diligence on a credit application or follow up on a nagging feeling that "something is not right" about a seemingly perfect deal?
If you were lucky, the loan application was approved and payment satisfied. But what about the times the buyer almost immediately defaulted, despite having some of the best income and FICO scores the dealership had seen in weeks, if not months? That may well have been a case of fraud, one of dozens or hundreds orchestrated by an individual or ring that affects your dealership and perhaps dozens of others.
"You need to really look closely at deals, analyze them," said National Insurance Crime Bureau Senior Special Agent Mike Kelso, based in Chicago. "Does it make sense that a doctor who has lived his life in Virginia is suddenly in Chicago and buying a car that will be shipped from California? We have dealers that make those deals and [when they prove fraudulent] always say, 'I didn't know.' Dealers are hungry. We all understand that. But if it seems too good to be true, it likely is."
Point Predictive, a San Diego company specializing in fraud detection, estimates the annual value of auto loan originations that contain some element of misrepresentation may be as high as $6 billion this year, twice the annual value estimated for 2016 originations.
Most dealerships work hard to ensure that misrepresentations of income, employment or credit don't get by. Defaults can damage their financing relationships with lenders. And when a customer skips with the car before a lender buys the paper, the dealership takes the out-of-pocket hit.
But fraudulent schemes exist that can trick even the savviest F&I manager. Some schemes rely on phony call centers set up solely to verify fraudulent information. Scammers also use synthetic identity fraud to combine authentic and false information that enables them to secure vehicle purchases. The Internet is also a fertile marketplace that enables visitors to buy unimpeachable identities that can be used for scams. Such thefts often go unnoticed for a long time, experts said.
"We know that because you have billions of identity records breached every year; there were more than 4 billion breached in 2016. That has created a very easy path for the perpetration of more organized attacks using identities true or synthetically fabricated through a convergence of many factors," said Keir Breitenfeld, senior business consultant at Experian, which has cyber experts who continually scour the dark web for such transactions. "That's where a fraudster might say, 'I will buy this person's identity and passwords.' The more detailed the information, the more valuable it is," Breitenfeld said.
And with upward of 4,000 new stolen identities hitting the dark web each month, it's a buyer's market. Scammers can easily buy information with specific characteristics — such as middle-age adults with FICO scores of 750-plus and incomes of $100,000 living in a specific ZIP code — so they can hit multiple dealers and merchants in one area.