More than $5.5 million in auto loan applications has been linked to a new fraud wave, mostly in Southern California, with borrowers using synthetic identities by manipulating Social Security numbers, according to fraud detection specialist PointPredictive.
The latest outbreak, in which applicants changed the last four digits of a valid Social Security number to create a synthetic identity, are likely linked to a rise in Credit Privacy Number sellers, according to Frank McKenna, the San Diego company's chief fraud strategist.
A credit privacy number, also called a CPN, is a nine-digit number consumers use in lieu of a Social Security number to protect their privacy on credit documents. CPN sales have been flagged by both the Federal Trade Commission and the Office of the Inspector General as an illegitimate credit repair tactic.
"This whole industry is set up to fool consumers to think these CPNs are legal, but behind the scenes, all they are are stolen Social Security numbers," McKenna said.
Over the past several years, a cottage industry has formed around supposed CPN sellers who provide instructions to consumers on how to create a separate identity, according to McKenna.
The scam is typically targeted at those with poor credit or no official Social Security number.
CPN sellers, however, provide more than a number. Generally, sellers will advise purchasers to buy a mail-drop location that has never been associated with their identity and list a temporary phone number, McKenna said, to flesh out a fake profile.
Ten auto lenders reported at least one application with Social Security numbers altered under the scheme in December, PointPredictive said. In all last month, 340 auto applications were linked to the fraud activity, the majority of which originated in Southern California.
Another tactic identified in the latest scheme was the substitution of the last four digits of the Social Security number with the birth year associated with the fake identity. Manipulated Social Security numbers are common in synthetic identity fraud cases, McKenna said, but "this is the first time we've seen this pattern."
"They'll find a prefix, change the last four digits slightly, and sell it to another person," McKenna said. "It might be easy to keep track of, to sell. They create this structure to systematize it."
PointPredictive estimates that $7 billion in auto loans was directly tied to fraudulent information in 2019, including misrepresented income, employment, identity and collateral. That figure is up about 5 percent from 2018, when $6.7 billion in auto loans was tied to fraudulent activity.
