Larger auto lenders adopted fraud prevention products early, says Geoff Miller, senior vice president and head of global fraud and identity at credit bureau TransUnion. That is having an impact on outstanding and new auto loans.
"Customers that have put preventative measures in place have seen a pretty dramatic slowdown, or reduction, in synthetic fraud," Miller told Automotive News.
However, smaller auto lenders that have not adopted technologies that identify and prevent synthetic fraud activity have seen a dramatic increase, Miller said.
TransUnion calculates that synthetic fraud activity resulted in $630.5 million in outstanding auto loans in the second quarter, a 1.4 percent increase over last year, but an improvement over the 5.3 percent increase from 2017 to 2018.
"Unlike a credit card, where it's a lower loss transaction, banks don't have the capability to investigate everything," Miller said. "When you lose a car — you're pretty motivated to find out what happened. So we think the auto lenders certainly recognized the problems sooner, which is why they embraced our solutions more aggressively."
TransUnion data indicates total balances from synthetic fraud rose to $1.02 billion in the second quarter from $1.01 billion in the second quarter of 2018.
The largest leap in synthetic fraud activity occurred in 2016, when fraud-linked accounts jumped to $854.4 million in the second quarter from $524.5 million the year prior.