Identity theft is the leading cause of concern for auto lenders today, fraud experts say, after a wave of successful phishing attempts masquerading as important information about COVID-19 potentially lured thousands of consumers into giving up personal information.
As forbearance and federal stimulus programs come to an end, TransUnion warns that credit washing attempts, where consumers try to remove legitimate loans and credit products from their credit portfolios, and synthetic identity theft, where scam artists cobble together a new identity by blending real and false information they use to steal vehicles, could make a comeback.
“It’s clear that fraudsters have the data and increasing opportunities to create synthetic identities and utilize stolen identities,” Shai Cohen, senior vice president of Global Fraud & Identity Solutions at TransUnion, said in a statement. “It can have long-term impacts for consumers such as the compromise of multiple online accounts and bringing down credit scores, which we anticipate will increase during pandemic reconstruction.”
Thirty-one percent of 2,059 U.S. adults surveyed online by TransUnion on June 30 admitted to being targeted by phishing scams. Another 8.5 percent admitted they fell for it. The representative sample could reflect that even more people have fallen for the schemes.
Loan payments could be a challenge for consumers in coming months as lenders phase out forbearance programs even as unemployment levels remain high.
Kimberly White, director of fraud and identity at LexisNexis Risk Solutions, said synthetic and manipulated identity fraud risk rose about 50 percent mid-March through May compared with the same period in 2019.
“We have had more conversations about fraud risk than we’ve ever had before with auto lending,” White said.
Misrepresenting income and employment and falsifying vehicle purchase documents to more easily roll in negative equity on trade-ins are also making an impact.
Lee Cookman, TransUnion’s director of product strategy of global fraud and identity solutions, told Automotive News that borrowers whose accounts are in financial hardship aren’t losing points on their credit scores, but “there’s clearly some impact on their ability to pay.”
Credit manipulation activity fell in March and April thanks to federal and lender intervention. Cookman believes those threats will rise toward the end of the year once forbearance programs end and negative credit data reporting and collections resume.
More than half of consumers TransUnion surveyed said they’ve been financially impacted by the coronavirus outbreak. Of those, 72 percent who identify as living under “major” restrictions meant to slow the spread of the virus said they’re concerned about their ability to pay bills.
PointPredictive, a San Diego fraud analytics company, conducts weekly surveys of several hundred automotive loan applications, and those surveys indicate fraud is on the rise, said Frank McKenna, the company’s chief fraud strategist. PointPredictive is identifying fraudulent information on an average of $2.6 million worth of auto applications weekly, up from an average of $1.5 million before the pandemic.
Income and employment misrepresentation is a growing area, said McKenna, as the U.S. experiences the highest unemployment levels since the Great Depression. “More people might need to fudge the details to get approved,” he said. “We’re seeing an influx in those areas.”
Consumers in financial duress or hardship can be lured into fraudulent activity even if they had no intention of defrauding a lender in the first place, Cookman said. Credit repair agencies advertise to people in dire straits, omitting the illegality of their business models.
“It’s reasonable for us to assume that those behaviors from the recession would swing back after the pandemic,” Cookman said. “That’s where you’re going to see … large vehicles abandoned somewhere and burned, and they’ll report it was stolen. They’re desperate to get out from under a $500-per-month loan when they’re underwater.”