Auto fraud has increased exponentially in the wake of the coronavirus pandemic as some people attempt to take advantage of the unprecedented moment in time. Investing in identity verification technologies can reduce fraudulent auto originations during the crisis, fraud experts said, but only if dealerships and lenders are on board.
One unexpected, increasing area of fraud risk for dealerships and auto lenders: the federal financial hardship and forbearance strategies keeping millions of Americans from falling behind on auto loan payments.
Thanks to existing protections and additional guidance in the Coronavirus Aid, Relief and Economic Security Act, lenders granting forbearance to customers in need aren’t jeopardizing their credit standing.
Lee Cookman, director of product strategy of global fraud and identity solutions at credit bureau TransUnion, said while these tools are preserving legitimate customers’ credit standing, they also open a door for fraudsters to ask for delays in negative reporting on stolen credit products.
“If you just raise your hand that you need assistance, [auto lenders will] put you in a forbearance program or a deferral,” Cookman said.
“You’re going to have a blend of people who are really in need … [and] people that are manipulating the system.”
Jeremy Finer, general manager of Local Finance Co., a small Florida lender that works with non-prime franchised dealership customers and those who don’t have histories with the credit bureaus, said it returned double the amount of auto loan applications than normal in May because of fraudulent information. Income misrepresentation was among the most common type of fraud discovered.
“A lot of people were trying to take advantage of the confusion on the furlough, on the job or off the job,” Finer said. “The fraud wasn’t some new type of fraud — it’s just the volume was increased.”