Synthetic identities: 1 in 5 have auto loans

More than 1 in 5, or 22%, of false identities created to carry out fraud are connected to auto loans, according to fresh data from SentiLink , a fintech company that detects and blocks synthetic identities. For the report, the company looked at 1,400 synthetic identities. The fintech defines synthetic identity fraud as a case in which the name, date of birth and Social Security number do not match a real person. With first-party synthetic fraud, the applicant's name and date of birth refer to a real person, but the Social Security number does not. Cases in which the name, date of birth and Social Security number are all tied to a fictitious person are considered third-party synthetic fraud. Fraudsters aiming to set up an auto loan using a false identity are more likely to go the first-party route, according to SentiLink, which found that 96% of synthetic identities in auto are considered first-party fraud, as compared with overall synthetic fraud, of which 79% are first-party fraud. Since the majority of synthetic fraud in the auto lending space is done through first-party fraud, it poses a major problem for auto lenders, who typically verify a borrower’s credit application by comparing the name and date of birth to a driver’s license, which does not list a Social Security number, Max Blumenfeld, co-founder of SentiLink, told Auto Finance News . Lenders may pull the wrong credit report, which can lead to an inaccurate reflection in charge-offs, making it “look like a credit problem, when it’s really a fraud problem,” Blumenfeld added. Lenders can proactively prevent those loses by also verifying the Social Security number. In 2019, fraud accounted for a $7 billion loss for the auto finance industry, a problem exacerbated by the rise in digital processes due to the COVID-19 pandemic, Todd Wolf, chair of the International Association of Financial Crimes Investigators ’ Auto Finance Coalition, said during a presentation at the most recent Auto Finance News Auto Finance Risk Summit. “Everything can be delivered to them to the mail or to a remote site. Fraudsters find it easier to commit auto fraud schemes versus having to go into a dealership,” Wolf said. Synthetic identify fraud specifically accounts for a nearly $1.4 billion problem for the auto finance industry, Wolf said. “Synthetic identity is the fastest growing form of any type of identity fraud. It’s estimated that 85% of all forms of identity fraud are a form of synthetic identity,” he said. “It takes longer for anybody to identify, especially if you are a victim and your Social Security number might have been compromised.” Auto Finance Summit, the premier industry event, returns October 20-22, 2020, as a virtual experience. The virtual experience will offer the quality networking and education of past events, all through an online platform. To learn more about the 2020 event and register, visit www.AutoFinanceSummit.com .

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