CHARLOTTE, N.C. — Auto loan fraud in the U.S is a big issue that’s continuing to grow, with data from Point Predictive showing record-high levels of attempted vehicle loan fraud.
The number of people falsifying documents to get approved for auto loans has increased 5% year over year jumping to $7.7 billion in 2021.
Researchers said the pandemic laid the groundwork for rising fraud risk and people have learned to falsify information to get approved for things like unemployment and PPP loans.
Now they’re branching out to new avenues like the auto industry, causing some car dealers to take a closer look at documents before handing over the keys.
"One out of every three applicants we get is fraud," David Humphrey with InstaCar said. "We have seen a lot more fake pay stubs people who have only been on their jobs a week but they say 6 months."
Researchers said they're expecting this trend to continue this year too, majorly impacting car dealers who have to track down cars and reverse the full transactions.
"According to a 2022 Auto Trend Report by Point Predictive, auto lenders endured more than seven billion in exposure during 2021.
The findings represent a 260% increase in loan misrepresentations and suspicious loan application activity identified over 2020.
The report also shows that 60% of losses were driven by false income, paystub forgery and employment fabrication.
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"People just don’t want to work, or they just started working so they give fraudulent pay stubs," Humphrey said.
Locally some auto dealers say they’re learning how to quickly identify red flags to avoid being scammed.
"When you have customers who want to purchase a vehicle, finance it, and do everything in one day that's a red flag," the owner of Emany's Auto Sales, said.
"How do we verify everything in one day?"
The average funded loan containing fraudulent information, if pushed back to the dealer represents a loss of at least $21,000.
If a car dealership takes that loss, it could take some dealerships 10 additional sales to make up for the cost of that fraudulent loan.
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