Identity & Fraud

The Changing Landscape of Fraud - what you need to know

The Changing Landscape of Fraud - what you need to know

September 21, 2022 | Zahid Kaseem

The Changing Landscape of Fraud

New and old fraud schemes are impacting all parts of the car buying journey. Dealers and customers are noticing the friction caused by measures taken to prevent fraud. Especially noticeable when it comes to the digital car buying experience. Car buyers don’t want to deal with unnecessary verification steps and dealers don’t want anything to get in the way of a deal. Both dealers and customers shouldn't have to choose between fraud prevention and an excellent customer experience. 

Innovative solutions can create a way for customer experience and fraud prevention can work together in concert. Allowing for an optimal and secure experience.  For those looking to mitigate risk of fraud, that means creating a low friction minimal risk customer experience , while making your fraud prevention methods less intrusive to the customer. Let’s explore some changing landscape of fraud schemes dealers have faced and some best practices to help prevent this in the future.

Misrepresentation of Income/Employment

As the economic pressures of inflation and the post pandemic continues to unfold, so does the ever-changing job market.  Post pandemic contracted labor, resulting in self-reporting income has become much more common.  Which can result in consumers and in some cases even collusion between dealer/consumers in order to facilitate falsifying income for favorable terms.  Thus, traditional methods of providing a paycheck stub to prove employment and income now pose a higher risk.  To mitigate the risk of fraud resulting in the repurchase of the contract, dealers should

  •  Consider third party data sources which provide income and employment verification. For those 1099 employees, using non-traditional data sources such as consumer consented bank data, can provide a deeper insight and an alternative means to reducing the risk of fraud.
  • Perform a simple google search to ensure the employer is legitimate. If their website is sparse, poorly worded, or contact information isn’t present, that is likely a red flag.
  • Call the employer phone number to validate. Ensure it’s an active line belonging to that employer . If possible, have them verify the information the customer gave you
  • Assess whether the employment, role and salary makes sense. For example does someone making minimum wage purchasing a $60,000 car make sense? Probably not.

Identity Theft Fraud

Identity theft, also known as identity fraud, is a crime in which a fraudster inappropriately uses personally identifiable information (PII), such as Social Security or driver's license numbers, to impersonate someone else. This type of fraud can be all too common and one that dealers need to protect themselves against. To reduce exposure to faulty identity information dealers should take work out of a human’s hand when confirming the identity. Dealers can achieve this by:

  • Verify consumer identification. Ensure the driver's license picture matches the customer looking to purchase the car.
  • Automate verification where possible. Acquire technology which validates the picture and the driver’s license + liveness check.  
  • Validate through 3rd party services. Use third party services to confirm personal identifying information to comply with Know Your Customer requirements.

Elder Abuse Fraud: a new and growing issue in the market is elder abuse fraud. Scams perpetrated against older people include a broad range of nefarious conduct. This includes taking out auto loans in the name of unsuspecting elders. Here are some ways to help prevent Elder abuse fraud.

  • Ask yourself does this deal make sense? First ask yourself whether the vehicle being purchased is the right fit for the customer.  For example if a customer is of a certain age and vehicle is beyond their means (sports car). That could be a red flag.
  • Request to meet in person. If you are unable to meet the individual in person to sign documents, that should raise some red flags. 
  • Ask the right questions. If all communication is with a care-taker or relative. Ask to speak to the person who will be financially responsible for the car.  If you can't, that should be an indicator it’s not on the level.

The risk of this fraud scheme dramatically increases in a digital environment. So trust but verify. These  simple steps can be the difference between a dealership becoming profitable or incurring operational losses to the detriment of their success in driving customer loyalty.

The regulatory environment and the confidence customers and the financial community place lenders to protect them requires lenders ensure the right controls are in place to mitigate financial, reputational, and regulatory risk.  As the car buying experience has shifted to a more digital centric environment so has the way fraud manifested from the traditional ways. The repercussions for a dealer can be hefty in the form of lenders requesting the dealer to ‘buy-back’ the retail installment sales contract or to some extreme dealers being asked to pay hefty fines for predatory behavior.

Dealers primary focus is to delight consumers in the upcoming purchase of their new vehicles.  Asking them to decipher a forged document can be very challenging. The relationship between a dealer and its finance partner hinges on trust. Losing that trust can lead to financial consequences for dealers and lenders. These proactive and create ways to address fraud that will also drive trust in the car buying process.

Zahid Kaseem

Zahid Kaseem

VP of Product Management

Zahid Kassem is currently VP of Product Management for Equifax's Digital Solutions organization, focused on product development of Identity, Fraud and Compliance platforms. Experienced executive with over 25 years of first and second line leadership roles within the fraud management practice which included strategy des[...]