‘Bust out’ auto fraud schemes lead to millions in losses

In an elaborate auto scheme, scammers are taking advantage of credit bureau delays to fraudulently finance hundreds of cars and sell them, leaving dealers and lenders to eat the loss. Bust-out fraud is a scheme in which fraudsters who falsely appear creditworthy take out multiple car loans within a short period of time and then sell vehicles overseas before the loans hit the fraudster’s credit report. [caption id="attachment_58353887" align="alignnone" width="1600"] (Courtesy/Canva)[/caption] Bust-out fraud cost lenders an estimated $50 million from the start of 2025 through June, according to risk management platform Point Predictive data shared with Auto Finance News . The number of bust-out fraud incidents increased 25% year over year in the second quarter of this year. The $50 million estimate is likely only a fraction of the losses associated with bust-out fraud since Point Predictive doesn’t receive reports from every lender in the industry, and bust outs can take six to 12 months to report, Chief Fraud Strategist Frank McKenna told Auto Finance News . The schemes, which exploit the 30- to 60-day delay before car loans appear on credit reports, are difficult to prevent, he said. “There will never be a silver bullet for [bust-out fraud] because this is a very complicated, sophisticated fraud where they purposefully are trying to go around the system." — Frank McKenna, Point Predictive Buying, ‘assuming’ identities Auto bust-out rings are commonly committing first-party fraud, in which borrowers use real identities — either their own or another person’s with their approval — PenFed Credit Union Senior Manager of Consumer Lending, High-Risk Underwriting and High-Risk Mitigation Matt Beardsley told AFN. In a survey of 200 U.S. businesses conducted in March and April, a little more than one-third reported encountering first-party fraud attempts, according to an Experian report published July 31. Top 5 encountered fraud events by U.S. businesses

[caption id="attachment_58353886" align="aligncenter" width="654"] (Courtesy/Experian)[/caption] To keep the auto fraud ring’s leader safe from arrests, some fraudsters will purchase or “assume” the identity of immigrants or noncitizens who were briefly in the United States for work or school, getting their consent to authorize loans using their identity, David Maimon , a Georgia State University professor and head of fraud insights for fraud prevention platform SentiLink , told AFN . “For example, if you were a foreign student here in the United States … you have [a] credit file around your identity,” he said. “Then you essentially sell — or give away — that identity to the fraudster, and they start working with your identity.” Florida, a fraud hub South Florida appears to be a hotbed of organized auto bust-out rings; one large fraud operation in Miami has made hundreds of auto loans and applications worth $10 million total, according to a March 3 Point Predictive release. At least 540 vehicles were purchased in bust-out auto fraud attempts in South Florida between Nov. 3, 2022, and Feb. 26, 2025, according to PenFed data analyzed by AFN . PenFed’s data includes booked auto loan applications in South Florida that the credit union identified as bust-out and fraud-related, sourced from more than 64 lenders, including major banks, credit unions and captives. While bust-out fraud rings may be very active in South Florida, similar incidents have occurred in California, Georgia, Illinois, Texas and New York, PenFed's Beardsley said. “Large-scale first-party credit bust outs have been problematic for several years now,” he said. “Instances of such have popped up from coast to coast.” In one of the most recent bust-out fraud auto arrests by Florida’s Miami-Dade Sheriff’s Office, Pavel Gomez-Deben , 53, of Hialeah, Fla., faces five felony counts after his May 17 arrest, according to court documents, including: Two counts of obtaining a vehicle through trickery; One second-degree count of theft valued between $20,000 and $100,000; One first-degree count of theft valued at $100,000 or more; and One count of organized fraud valued at $50,000 or more. Gomez-Deben’s arrest report does not detail whether he was part of a fraud ring. However, the arrest report’s descriptions of his actions follow a similar routine to the average bust-out fraud case, according to fraud experts. Credit washing, falsifying payments Once a borrower is recruited, the fraud ring begins credit-washing , or filing false claims of identity theft, to remove negative marks from credit reports, SentiLink’s Maimon said. In other instances, fraudsters falsify their income. By reactivating a once-defunct company, known as creating a “shelf company,” borrowers can falsely claim they run the company, exaggerating their income while mitigating suspicion. While Gomez-Deben told law enforcement he was a barber, he didn’t put that information on his auto loans, according to the arrest report. Instead, he allegedly reinstated a Florida company called P&G Truck Lines LLC , which had been inactive since 2021, according to Florida Department of State records. Before he reinstated the company, P&G Truck Lines LLC had never listed Gomez-Deben in its annual company reports. Posing as president of P&G Truck Lines, Gomez-Deben falsely stated his annual income was $247,200 on auto loan applications, according to the arrest report. Financing fast Once fraudsters appear creditworthy, they take out as many auto loans as possible within one to two months, during the 30- to 60-day period before car loans appear on credit reports, according to Experian. Borrowers in South Florida identified by PenFed took out an average of eight car loans each within two months, according to AFN analysis of PenFed’s Miami bust-out data. One listed borrower took out 21 car loans from Jan. 16 to Feb. 21. Deben-Gomez racked up 16 credit inquiries within two days, according to the arrest report, which noted that Gomez-Deben successfully took out a loan for a 2025 GMC Yukon worth $96,826.75. Selling, renting cars Once the cars are obtained, fraud rings either sell them overseas or sublease them illegally on an auto rental platform such as Turo , Point Predictive’s McKenna said. If vehicles are exported, it is all but impossible for dealers or lenders to repossess them, he said. “Once they send it overseas, it’s pretty much gone,” McKenna said. To sell a vehicle without arousing suspicion, fraudsters take part in “title washing,” by submitting fake lien releases to the Department of Motor Vehicles. Around 46.6% of business-purpose, commercial and residential loans were flagged for issues that posed a significant risk of wire and title fraud in the second quarter, according to a July 21 report by risk management platform FundingShield that analyzed transactions in an $81 billion portfolio. Some fraudsters who submitted fake lien releases to the California Department of Motor Vehicles received a valid title as a result and exported those vehicles, PenFed’s Beardsley said. “[Fraudsters] export vehicles purchased in Miami-Dade County region to various South American countries where they can often be sold for more than the original purchase price listed stateside,” Beardsley said. The California DMV is aware of title-washing and encourages consumers buying used vehicles to inspect any titles and registrations presented, spokesperson Ronald Ongtoaboc told AFN . “A private-party vehicle purchase comes with the increased risk of falling victim to a scam, so buyers should always be cautious,” he said. “The DMV does not verify title and registration for individuals seeking to purchase a vehicle.” In other instances, fraudsters manually replace the vehicle’s Vehicle Identification Number with a VIN they’ve created fake documents for to ensure sales go through, GSU professor Maimon said. “They put tutorials out there," Maimon said. “They will remove the firewall, sand off the VIN [and] embed a new VIN, which is consistent with whatever VIN they have on the title." Prevention Deben-Gomez never got far enough along to sell his vehicles, according to the arrest report. Rather, he was arrested shortly after attempting to open a loan on a 2021 Mercedes-Benz AMG valued at $175,118.22. However, he was only arrested after Mercedes-Benz of Miami ’s general manager received the successful loan application from sister dealer Lorenzo Buick GMC , according to the arrest report. Lenders and dealers are now beginning to implement multilayered systems and fraud data consortiums to fight bust-out auto fraud. Tampa, Fla.-based Morgan Automotive Group , for one, built out an internal fraud verification platform after it saw fraud attempts “heating up” after the pandemic, Vice President of Financial Services Justin Buzzell told AFN . The dealer group’s software puts any applications completed off-site through a multistep verification process, he said. “If they can get through all of that, we’ll sell them the car.” — Justin Buzzell, Morgan Automotive Group Morgan Automotive Group closed a deal with Point Predictive, allowing the dealer group to use Point Predictive’s fraud prevention tools that cross-reference across the software’s database, according to a Point Predictive release published July 1. Point Predictive’s database and other fraud prevention consortia can send out notifications to all entities within their network once any individual dealer or lender reports fraud, McKenna said. Lenders and dealers may also collaborate more directly via fraud prevention training, Point Predictive’s McKenna added. “What a lot of lenders are doing in dealerships, too, are doing training, looking for the red flags of these people,” — Frank McKenna, Point Predictive While fraud-prevention consortiums like those offered by Point Predictive can inform multiple lenders and dealers at once, the only entities able to create a comprehensive fraud database are credit agencies, Steve Lenderman , head of fraud prevention at isolved, a payroll software provider, and co-chair of the Bust Out and Synthetic Identity Industry Group , told AFN . The Bust Out and Synthetic Identity Industry Group is an organization of professionals working to mitigate and investigate bust-out and synthetic identity fraud. For credit unions and other historically smaller lenders, the best prevention method may be to exit larger markets, Lenderman said. “They are way out of their lane right now,” he said, noting that credit unions do not have adequate tools, technology or funding to effectively mitigate risk. In the meantime, underwriters should inspect borrowers’ additional credit history, including where they live and if their phone or email records are consistent, SentiLink’s Maimon said. “When you look at those identities, you’ll be able to see substantial gaps,” he said. “[For example,] the last time you saw the guy, he was in California. Now, 10 years after, you see him in Florida, there’s nothing in between. That’s a cause for concern, right?” As fraud schemes constantly evolve, so too must fraud prevention tools, Point Predictive’s McKenna said. “It’s going to be a cat-and-mouse game forever," he said. Auto Finance Summit, the premier industry event for auto lending and leasing, will host a fighting fraud panel with Dawn Carpenter, chief risk officer of Mercedes-Benz Financial Services USA, and Megan Prouty, AVP of consumer lending operations for PenFed Credit Union. Auto Finance Summit returns Oct. 15-17 at the Bellagio Las Vegas. Learn more about the 2025 event and take advantage of the Aug. 29 early-bird registration here .

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