Identity Fraud - Dealership Corridor

While the country is still in the grips of the pandemic, sales of new and used vehicles showed signs of life in May and June with big pickup trucks leading the way. For the quarter, analysts predict that car sales were off about one-third from 2019 levels, thanks in large part to plant shutdowns and shelter-in-place restrictions imposed in March and April. The economic stimulus CARES and PPP programs, along with enhanced state-level unemployment benefits, provided a bit of a boost in May, prompting consumers to consider purchasing a vehicle. Low interest rates and OEM incentives sweetened the deal. Savvy dealerships who pivoted to online and digital sales were able to capture the bulk of the upswing in June.

Q3 results hinge on several factors. Pandemic hot spots across the country could prompt local governments to return to some level of shutdown. Whether or not Congress provides a second round of stimulus could also have a dramatic impact on consumer confidence. And the U.S. unemployment rate could put a notable damper on both new and used vehicle sales.

Also, let’s not forget inventory concerns. Factories that shut down in March and April are just beginning to ramp up. There will be a noticeable delay in restarting the parts supply chain as well. Areas of the country that experienced strong sales in May and June could be faced with slim pickings on their lots.

But there is another – somewhat hidden – concern. Identity fraud has reared its ugly head. While fraud has always been an area of focus and concern in the retail automotive world, a couple of unique pandemic situations have exacerbated the situation.

Contributing Author:
Steve Roennau
Vice President
EFG Companies

Those of us who are active on social media likely have created an “avatar” – an image designed to represent ourselves digitally. Defined specifically in computing language, an avatar is the graphical representation of the user or the user’s alter ego or character. The avatar image says, “This is the image I want to project,” but it might be less than accurate.

Even the person actually walking into your dealership might not be who they say they are – even if they have legitimate data, like a valid social security number tied to a legitimate address, to support their claim.

Synthetic fraud is the fastest growing form of identity theft in the U.S., comprising 80% of all new account fraud. The fraudulent tactic uses a combination of real and fake personally identifiable information (PII) to create new credit profiles and pump up credit scores, allowing the criminal to access goods and services.

The most common method of synthetic fraud is professional criminals using a variety of methods to make money exploiting the systemic weaknesses of the U.S. credit system. It may involve theft of a child’s real identity and applying for an employer identification number (EIN). Then, the criminal builds a synthetic credit profile with the victim’s real name, social security number, and date of birth (DOB), with a different address or phone number. Next, the professional criminal applies for credit through mortgage refinancing or a car loan, which pulls the report from all three major U.S. credit bureaus (Experian, Equifax and TransUnion). While the application may be denied, the process of reviewing the application creates a new credit profile at all three bureaus (also known as “tri-merging”) with the synthetic information. A few more steps and the fraudulent profile is complete, including lines of credit, employment history, mail received, etc. And now that criminal looks legitimate on paper.

With synthetic fraud, everything may seem legitimate at first blush. For the dealer, they move a car off the lot. For the lender, they have a loan in good standing. Unfortunately, the person who was originally assigned the particular social security number has no knowledge of the loan, and may never find out until the loan defaults or fraud is uncovered.