For car dealerships, especially Buy Here Pay Here dealers, protection from fraud is an important part of doing business. A Point Predictive study reported a significant shift toward fraudulent vehicle financing. In 2022, the auto lending industry had more than $8.1 billion in origination-risk exposure. One major risk is synthetic identity fraud.
You might ask, what is synthetic identity fraud? While it sounds like something from a sci-fi movie, it’s a form of financial fraud where a real person’s Social Security number is stolen and combined with fake information, like a date of birth, mailing address, an email address and more, to create a new identity.
Synthetic identity fraud has increased 45% since 2018, with a 12% increase in 2022 alone.
The Federal Trade Commission estimates that about 80–85% of identity fraud is synthetic identity fraud.
This type of fraud is so popular because it’s harder to catch. Often, the fraudster will use Social Security numbers of people who are less likely to monitor their credit, like children, the elderly and homeless people. The fraudsters then create an identity with small purchases and establish their identity with businesses that don’t have a rigorous vetting process. Once they’re in the system, they can spend years building a convincing identity with a credit history and proper credit scores until they’re ready for the big payoffs, like fraudulent auto loans.
Synthetic fraudsters often target Buy Here Pay Here dealers, hoping to take advantage of relaxed credit requirements to obtain high-priced vehicles. Once they have the loan, they default on it and sell or pawn the car, leaving the Buy Here Pay Here dealer saddled with the loan while the car is long gone. Dealerships face a significant blow, given that the average cost of auto-financing fraud is $21,000.
Proper fraud risk management starts with identity verification. Check their identification to be sure they have genuine government-issued IDs and bank payment stubs to confirm their employment. Use a program that checks consumer applications across multiple sets of public and proprietary data. These programs can check to ensure that:
Of course, identity verification doesn’t work unless you know how to use it. Train your staff to look out for synthetic identity fraud and teach them how to use proper protocols to decrease the chances of fraud.
Scammers can easily slip past the system with advancing technology, but car dealers can also use it for enhanced fraud risk management. Use analytic solutions, like predictive AI, to analyze data to detect links and find suspicious patterns to help determine if the applicant is a real person. Organizations can reduce false-positive rates and flag suspicious applications by analyzing data.
Using machine learning algorithms, you can help discover unique behavior patterns. It can help identify suspicious activity, such as authorized-user abuse, making you better prepared to reduce fraud charges and losses.
Tools like Seon can prevent payments from stolen cards and use social and digital analysis to check for synthetic fraud. You can also use them to verify client info. These programs combine human insights with a Whitebox Machine Learning algorithm. Discover other ways you can help prevent fraud.
Including GPS tracking in fraud risk management strategies is crucial. Having a GPS tracking system in place means you have additional protection for your assets in the event of fraud. You can easily see where the car is at all times, whether you use a small GPS tracker or a built-in GPS system. You can use a GPS management system with many features that go beyond being able to locate a vehicle quickly, such as:
PassTime GPS devices are the ultimate tool in vehicle protection. PassTime created a variety of GPS solutions to meet each customer’s specific needs. Solutions like TRAX SI were designed with BHPH dealers and auto-finance companies in mind. TRAX SI includes smart features like geo-fencing and starter interrupt to protect your assets against theft and fraud.
The small GPS tracker Encore is a sleek, discreet and battery-powered device that can be added to your car in a snap. The 4th-generation Encore GPS boasts 150% greater signal capture, accuracy and performance than its previous generation, geofencing and four power modes that allow you to track assets twice a day. With all that battery power, you’ll have enhanced capability to keep your vehicles safe. You’ll have enhanced capability to keep your vehicles safe.
Check out how PassTime GPS helped recover stolen and fraudulently purchased vehicles quickly. Want to figure out which GPS solution is right for you? Contact us now to get a quote.
