During a time of increased faked-identity scams in the industry, lenders should prepare for more fraudsters following last week’s Equifax data breach, according to the fraud detection company PointPredictive.
The breach exposed half the population’s Social Security numbers, addresses, and driver’s licenses. “What we’re seeing is that synthetic identity is a significant problem right now for auto lenders,” Frank McKenna, chief fraud strategist at PointPredictive, told Auto Finance News.
“This is just going to compound that problem because with this information for sale, you can create better synthetic identities that look more real.” The company predicts that application fraud rates — across all sectors, not just auto — could increase 10% to 15% next year due to the breach. That’s coming off historically high levels of fraud, costing an estimated $6 billion in annual losses to auto lenders, the company said.
Heightened fraud caused Santander Consumer USA to host a consortium in April. Since then, 38 of the top 100 lenders are involved in discussions to share fraud data in an effort to combat the problem.
Many concerned consumers are freezing their credit, which could slow the underwriting process, said Pelican Auto Finance LLC’s Chief Compliance Officer Joel Kennedy. “My guess is that a vast majority of consumers impacted are going to follow the guidance to either put a credit freeze on their bureaus or get credit monitoring, or both,” he told AFN. “In the indirect space though, the F&I offices at dealerships will be the first to see the real impacts.”