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paystubs and a phone number used for rental rates compared to traditional but it shouldn’t be the sole focus —
the purposes of fraudulently verifying rental agencies. 80% of buybacks might not be related
employment to the lender. Often this to identity-related fraud scams.
phone number actually works, and But that has also resulted in a sharp 2. Always check to see that the income
naturally the individual answering spike in straw borrower fraud. makes sense for what you know about
the phone convincingly “confirms” Borrowers looking to cash-in are the applicant. Look for red flags for
employment as expected. using straw borrowers to help them potential income fraud. An applicant
fraudulently finance vehicles, which who claims to be employed in a low-
Over 100 new fake employers are being are then listed and rented on Turo for wage position should prove income
discovered by Point Predictive’s fraud profit to the fraudster. that aligns with that position. Younger
analysts each week, amounting to applicants should rarely claim income
millions of dollars in attempted fraud • Did we mention paystubs? Some that is typical of a mid- or late-career
against dealers and lenders. lenders are reporting that up to employee. Finally, an applicant who is
40% of the paystubs they receive making a dramatic leap in the cost of
• Stolen, fabricated, and difficult from some dealerships are forged or their cars, such as trading in a junker
to verify identities are used in altered. But it certainly isn’t a problem for a newer model luxury or high-end
fraudulent ways. Identity fraud limited to shady dealers. On average, vehicle should be verified to assuage
and creation of synthetic identities even the astute dealership will still the suspicion of fraud.
is soaring in auto lending. By all receive one fraudulent paystub out 3. Check employment discrepancies.
accounts more than $1.2 billion in of every 12 paystubs submitted by an Oftentimes a bogus paystub will
loss exposure will cross lenders’ desks applicant. Suspicious documentation have mathematical inconsistencies
this year. But this year there’s a twist is becoming far more prevalent, and that become apparent upon detailed
— the fraudsters are using face masks every dealership needs to protect inspection. Values on the stub might
to hide their identities during an in- against it. not add up correctly. Bonuses,
store interaction, leaving quickly and commissions, and withholdings may
having cars delivered to them at dead- 5 Ways to Protect Your look distorted relative to the wages
end locations where they can never be Dealership from Fraud claimed. Pro tip: you can always ask an
traced. applicant to sign an IRS Form 4506T,
Just because fraud has risen dramatically, which gives you permission to verify
• Straw borrowers are buying cars to it doesn’t mean your dealership will be income that the applicant reported to
covertly sublease them. The pandemic specifically targeted. Even dealerships that the IRS.
forced many dealerships to temporarily protect themselves will need to fight fraud, 4. Beware of straw borrowers. Look for
shut down or significantly limit their since the nature of these attacks change potential straw borrower red flags.
activity and inventories. At the same quickly. One of the most common ways to Straw borrowers are often coached by a
time, many rental agencies sold off be victimized by a new type of fraud is to co-conspirator, and certain questions,
portions of their fleets. This allowed be effective at preventing older schemes. requests, and actions might not make
peer-to-peer platforms such as Turo Here are some ways you can protect your sense.
to thrive. Services like Turo continued dealership. 5. Monitor new finance managers. If a
to offer renters a diverse selection of new finance manager’s performance
vehicles for short-term rental with an 1. Don’t just focus on identity fraud. is too good to be true, it might not be
elegant customer experience and lower Identity fraud prevention is important, true. F&I managers who seem able to
work miracles to get even the most
down and out borrower funded might
be doing something extra to get those
loans approved. It is crucial to monitor
the process, enforce intentional risk
controls, and make sure that new
finance managers are keeping the
dealership’s business and reputation in
top shape with its lender network.

Like many challenges facing the car buying
market, the problem of fraud will never go
away. We expect it to continue to grow and
become even more challenging to prevent.
Dealers must leverage every practical tool
and technology to keep fraud at bay. n

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