Major auto lenders late last year reported an overwhelming influx of complaints from customers reporting identity theft. The claims, however, were fraudulent and part of a widespread scheme to prompt auto lenders to remove legitimate trade lines from those customers' credit reports-- a practice known as credit washing or credit repair fraud.
Credit washing is not a new problem for lenders, but it is an expensive one. And credit repair fraud is among the top three fraud concerns for auto lenders this year, along with systemic fraud activity from dealers and synthetic identity fraud, which occurs when criminals cobble together real and fake personal information to make fraudulent purchases, according to PointPredictive, a San Diego company specializing in fraud detection.
Three auto lenders reported four times more credit washing cases coming into their fraud departments since last fall, said Frank McKenna, chief fraud strategist at PointPredictive. The company would not disclose which lenders were impacted due to nondisclosure agreements.
Overall auto lending fraud risk has risen at least 38 percent in the last seven years, according to PointPredictive's analysis of more than 70 million historical auto loan applications. PointPredictive forecasts that the annual value of auto loan originations that contain some element of fraud will hit $7 billion this year. Last year it reached $6.7 billion.