Helping Dealers Fight Synthetic Identity Fraud with a Multi-Layered Approach
FRAUD IN THE AUTOMOTIVE INDUSTRY IS INCREASING AT AN ALARMING RATE, MAKING IT ONE OF THE HOT TOPICS OF DISCUSSION AT THE RECENT ANNUAL AUTO SHOWS. While many fraud attempts are foiled before they happen, fraudsters continue to get more and more sophisticated at finding weak controls they can pass through with automotive dealers and lenders.
Fraudsters today are focusing more of their activities on areas like new account fraud, where they create new, fraudulent identities or synthetic identities. A synthetic identity fraud is a fictitious identity, often built with a combination of real data and fabricated information. Fraudsters use a synthetic ID in an attempt to gain credit with the fictitious identity to monetize a transaction.
“Use of synthetic identities in auto have grown more than 59% per year since 2020 – creating a significant risk for the industry with an impact expected to exceed $250M dollars in losses over the last five years,” said Sharla Godbehere, Vice President of Sales in Auto Lending for Equifax.
With fraud losses growing at such a high rate, it begs the question – exactly who should address the issue? The dealer? Lender? Technology service provider? The answer is most likely all of the above. Unless each party contributes to a “layered approach” to reduce the threat, the fraudsters will continue to win.
What Solutions Can Help with a Layered Approach?
“Each part of the auto industry can play a role in maximizing the best protection against theft,” added Godbehere. “There is no one silver bullet solution that can stop fraudsters – there are a variety of solutions that can easily fit into the current lender and dealer processes as an added line of defense to help decrease losses from bad actors.”
A layered approach to detecting fraud is a good way to defend against fraud. Having early alerts in place can warn the dealer/lender to potential or known identity theft and application fraud in real-time and quickly identify identity documents not consistent with issuer formats.
Cox Automotive recently announced at the 2024 NADA show they will add Synthetic ID Fraud Alert to their Dealertrack capability, a solution leveraging proprietary data sources and integrated with best-in-class fraud detection from Equifax, helping to protect dealers against fraudulent transactions earlier in the Finance & Insurance (F&I) process.
Another helpful tool that instantly validates a customer’s identity and can help mitigate fraud is InstaTouch ID - a fast, secure and user-friendly experience that utilizes mobile carrier data to instantly validate a customer’s identity as well as autofills form fields with their personal information to reduce data entry and accelerate the transaction process.
As today’s fraudsters get more strategic in the ways they are stealing from dealers, lenders, and consumers, now is the time more than ever for the industry to consider all potential solutions and take a layered approach to help reduce the threat of fraud.
Learn more about the Equifax auto fraud, data, analytics and technology solutions here.
Additionally, Equifax produces its Auto Credit Trends data reports each month, designed to provide automotive professionals with the latest auto credit information to help them make informed decisions.