Fraud and identity theft are escalating across the board, and auto lenders have become vigilant, acting to prevent crimes from affecting their businesses, dealer clients and customers.
Identity theft produces staggering numbers of victims and losses, says Mark Pribish, ID theft practice leader at Merchants Information Solutions in Phoenix. Data from Javelin Strategy and Research show that in 2015, 13.1 million U.S. consumers lost $15.3 billion to identity theft. 2016 was worse, with 15.4 million consumers losing $16 billion. Totaling the past six years, identity thieves have stolen more than $107 billion from consumers. "To me, that's mind-boggling," Pribish said.
It's not surprising, then, that the Federal Trade Commission recorded a doubling last year in the share of identity-theft complaints related to auto finance. According to the FTC, 1.7 percent of identity-theft complaints last year (or 6,787) indicated that auto loans or leases were generated by identity-theft criminals, up from 0.8 percent (or 3,922) in 2015.
But the FTC data might not show the complete picture. The agency tracks only affidavits that consumers report. Because most consumers never file an affidavit, Javelin, using statistics from the FTC, estimated there were 261,800 auto loan or lease identity-theft victims in the U.S. last year. About $272 million was stolen from the group — just more than $1,000 per victim.
As fraud rises, lenders are ramping up detection and prevention efforts, said Frank McKenna, chief strategist for fraud and risk analyst Point Predictive. "Lenders are really serious about [fighting fraud] and really taking measures," he said. "The lenders we work with are really diligent about this. They are actively doing a lot that probably nobody even knows about."
To be proactive against auto loan fraud, lenders should enhance dealership partnerships, develop an internal culture that makes fraud prevention a priority and abide by the Red Flags Rule, experts say.