5,000 fake employers flagged on car loan applications since 2019: Here's how to spot them

More than 5,000 fake employers have appeared on auto loan applications over nearly three years, according to the fraud screening firm Point Predictive.

The deception was associated with about $1 billion worth of loan value from February 2019 to December 2021, Point Predictive said Thursday. It estimated fake employer loan application volume grew from about $7 million per month to $35 million per month during that time.

Sometimes, Point Predictive or its lender clientele caught the fraud before the loan. Other times, it was discovered after the fact.

"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.

McKenna offered dealerships some solutions F&I offices could use to catch customers with pay stubs from phony employers.

Salaries: McKenna said pay stubs from fake employers typically suggest annual income of $65,000 to $80,000 because instructions available on employer fraud suggest that range. "They never want to make it look too much or too little," he said.

Time employed: In a similar vein, fraudsters will often supposedly have worked at the job for a moderate amount of time, according to McKenna. Ranges of three to five years are common among phony employees.

Job title: Often, the applicant will claim some sort of management role, such as "manager" or "office manager," McKenna said.

Conversation: McKenna suggested a dealership try some "small chat" and ask a suspicious applicant about what they do on the job.

One could also ask the applicant to verify something from the pay stub, such as weekly income. "Because the information's falsified, people can't remember what's in there."

Online search: Checking the employer's website or looking up the phone number can also expose a phony workplace, McKenna said. Typically, phony employers have new, "really bad" websites and phone numbers using Google Voice accounts.

"It's gonna be very nonprofessional," McKenna said.

Dealerships in certain geographies and selling certain brands might wish to remain particularly vigilant.

Point Predictive said Georgia; Texas; Washington, D.C.; Nevada; and Illinois had the highest rates of employer fraud in terms of loan amount per capita, in that order. Texas, California, Georgia, Florida and Illinois were the top five in overall loan dollars associated with employment fraud, with Texas dwarfing the others.

The Dodge Charger, Nissan Altima, Hyundai Elantra, Chevrolet Malibu and Dodge Challenger, in that order, represented the most popular models consumers attempted to finance citing phony employers, according to Point Predictive.

McKenna said he'd expected the list to be all muscle cars and luxury models. He said the appearance of the more mainstream vehicles might reflect the distinction between professional thieves and people who just need a car.

Some of the applicants relying on employer fraud likely had poor credit, limiting the amount of car they could qualify to finance anyway, McKenna suggested.