"The rise in the use of fake employers on credit applications is astounding, and the $1 billion threshold only proves the growing threat of this problem," Point Predictive senior fraud analyst Justin Hochmuth said in a statement. "We're uncovering about 100 new fake employers that are being created each week."
Point Predictive Chief Strategist Frank McKenna told Automotive News on Friday he expected 2022 to be a "pretty significant fraud year" because of factors such as vehicle scarcity and interest rates.
Dealers should be particularly vigilant between February and May, McKenna said. He said fraud is on the rise in general and typically spikes annually during tax season, when Point Predictive said it sees higher demand for loans and credit repair.
Thirty percent of loans with a fake employer wound up charged off, several times the rate of loans citing true employers, according to Point Predictive. More than 60 percent of the loans that charged off did so immediately or within the first six months.
CEO Tim Grace said some of the phony companies' supposed work forces are defaulting on loans 40 to 100 percent of the time.
"When one of these fake employers is used on an application, the loan is significantly more likely not to perform," he said in a statement.
Not all the applicants with phony employers are committing "fraud for profit," such as a criminal enterprise financing vehicles it intends to default on and sell off, McKenna said.
Some fraudsters just need a car and might try to make payments on it.
"They're well intentioned," he said of such "fraud for car" applicants, but they might not be able to afford the vehicle.
Another, more professional, "fraud for car" scheme exists as well, according to McKenna: Criminals who lie to finance vehicles they will stockpile and sublease or rent out for profit, such as on the car-sharing platform Turo.
"That's a big new trend right now," McKenna said, citing the shortage of rental cars.
McKenna said the first "fraud for car" scenario has been fueled lately by a rise in unscrupulous credit repair businesses promoting phony employers among other forms of repair fraud.
Unlike legitimate credit repair companies, these firms are selling fake employment documents to clients, McKenna said.
"You can throw up a credit repair company in a day," McKenna said.