Point Predictive released its 2025 Auto Lending Fraud Report, revealing some startling data. In 2024, lenders’ estimated fraud loss exposure reached approximately $9.2 billion – an increase of 16.5% year over year. First-party fraud accounted for 69% of all auto lending risk. While these numbers are alarming, the good news is that your best defense is your employees. Your job is to ensure they are up to date on their training.
Let’s delve into some of the details in the report. Over two-thirds of the risk to auto lenders relates to income and employment misrepresentation, synthetic identity, and credit washing. These misrepresentations are typically associated with first-party fraud, where the borrower commits fraud rather than a criminal using a stolen identity. The use of AI tools in the lending process also makes fraudulent operations increasingly convincing and accessible. While criminal rings certainly exist, the average credit union is at most risk for first-party fraud. As you work to increase your auto loan portfolio, make sure your lending teams are current on their compliance training.
Vulnerable Consumers
With unemployment rates climbing and unemployment durations lengthening, many Americans face a perfect storm of financial instability. These economic pressures are directly fueling fraud growth. Desperate buyers are more likely to inflate income or misrepresent employment to qualify for auto loans. Plus, financial hardship makes people vulnerable to fraud schemes that promise quick money.
Consumers looking to erase legitimate negative credit history can be a flag for credit washing. According to the Auto Lending Fraud Report, one in every 59 auto loan applications now displays signs of credit washing fraud, a practice employed by unscrupulous credit repair companies or buyers gaming the lending system.
Train your lending team to review all aspects of the loan and counsel their members if the terms seem to be a stretch financially. Offer debt protection products to safeguard the loan and ease potential financial concerns the member might have.
Double Check Details
Point Predictive’s report points out that true name identity theft has shown the most significant growth, representing approximately $1.6 billion in fraud risk in 2024, up from the approximated $1 billion reported in the 2023 data. The rise suggests criminals are increasingly targeting auto loans using stolen identities. Again, reinforce training with your lending team to check – and re-check – all documents for accuracy.
Partner with Dealers
The report also reveals an increase in systematic dealer risk as auto dealers across the country are reporting an increase in fraud attempts. Organized fraud rings work together to exploit outdated fraud controls, and legacy dealer fraud alert systems no longer offer sufficient protection. Work with your dealer partners and encourage dealer principals and F&I managers to reinforce training. EFG offers several training courses for every aspect of F&I compliance.
While many of these details on auto lending fraud are concerning, you can protect your credit union and lending portfolio. At EFG Companies, we’re more than an F&I provider, we’re your trusted business partner in auto lending. Together, let’s make more in 2025.
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