Fighting Identity Theft: Five Steps to Prevention

Consumers providing false credentials, including employment and income, is a type of fraud that costs auto lenders billions of dollars each year, prompting financial institutions to come up with creative solutions.

Lenders can protect themselves in several ways against fraud involving falsified pay stubs and bank statements as well as falsified credit history. Here are a few:

1. Rely on the experts: Lenders should hire fraud specialists or set up a dedicated team trained to identify fraudulent information used to apply for credit. When fraud is detected, it is crucial that financiers involve law enforcement and help build cases against fraudsters, Aaron Warnerfounder and managing director of a computer security company ProCircularTold Auto Finance News.

“It’s easy to fall through the cracks when you’re dealing with hundreds of thousands of [applications]”, Warner said. “There are a lot of hands between the buyer, the automaker and the financial arrangements… there is a lot of room for [fraudsters] to find a flaw in this armor.

2. Take advantage of artificial intelligence (AI): Lenders can implement AI-based fraud scoring technology that can inform them of areas of concern related to a loan application, including whether a borrower has used a false identity, falsified income, or included a fraudulent paycheck stub. Fraud scoring systems can usually detect the level of fraud present, for example 3% or 5% of loans, allowing lenders to focus on legitimate borrower accounts, Frank McKennaco-founder and chief fraud analyst at a fraud detection technology company predictive point, Told APN.

3. Partner with fintechs: Fintechs can provide external services that would otherwise be time consuming and expensive to set up. Allied Financialfor its part, works with a document analysis provider Informed.IQ to flag fraudulent payslips using robotic process automation (RPA) and AI. MidAtlantic Finance Companyalso, works with Point Predictive to identify revenue gaps and Turbo Pass, a software-as-a-service provider, to analyze and verify bank statements. “We use a whole host of different tools…they’ve been helpful in spotting wage and income gaps,” said Mike PereiraVice President of Lending Operations at MidAtlantic Finance.

4. Raise awareness: Financial institutions should ensure that everyone within the company is aware of common types of fraud and train staff in anomaly detection. VW Creditfor its part, trains its origination and servicing teams on how to identify what fraud looks like in the lender’s specific loan origination system.

5. Collaboration is essential: Financiers should share common fraud data with other lenders to identify patterns and develop prevention strategies. “The sharing of information and the development of these networks [is critical] so that a lender can receive alerts stating “[Another lender is] seeing an increase in this type of fraudulent activity in your area,” Katherine Romano Schnackfrom the lawyer from the law firm McGlincheyTold APN.

Many credit repair companies use the same data over and over, giving lenders the ability to flag loans using known fraudulent company names or other information, McKenna said, noting that Point Predictive has identified more than 8,000 fake employer names and phone numbers used to commit fraud.

Auto Finance Summit, the industry’s premier event for auto lending and leasing, returns October 26-28 at Wynn Las Vegas. To learn more about the 2022 event and to register,

Comments are closed.