Some dealership staff might intentionally send suspicious loan applicants to a lender partner hoping to close the deal. But according to antifraud provider Point Predictive, many dealers don’t even realize when they’re transmitting a fishy loan.
Better training and lender communication could help dealerships avoid being an unwitting accomplice to fraud or having to buy back fraudulent auto debt, according to Point Predictive Chief Fraud Strategist Frank McKenna.
McKenna’s company has launched BorrowerCheck, a tool to help dealerships spot fraud. But it’s also training retailers to notice it themselves, McKenna said.
“They’ve experienced it, but they just don’t know it,” McKenna said.
Seventy percent of auto loans that default within the first six months — a sign of potential fraud, most lenders say — have evidence of misrepresentation on the initial application, according to Point Predictive’s 2022 Auto Fraud Trends report.
But lenders who encounter fraud might simply absorb the loss rather than charge it back to the dealership. Point Predictive’s 2021 Fraud Sentiment Study found a fifth of the lenders it polled didn’t require partner dealerships to buy back early defaults or fraudulent loans.
“If you’re working with those lenders that don’t, you would never know,” McKenna said.
McKenna said Point Predictive can teach dealerships how to spot fake identification and suss out synthetic fraud indicators on credit reports.
He said they’ve begun working with stores in a dealership group and have caught issues including synthetic fraud, forged pay stubs and phony employers — items “dealers haven’t seen before or maybe haven’t had much knowledge of,” McKenna said.
Lenders are growing more aggressive on chargebacks, according to McKenna. He said this causes dealerships pain, but it also raises awareness of the issue and leads surprised retailers to say, “ ’I don’t even know; I don’t see this stuff later,’ ” he said. “ ’What’s risky, what’s not? I don’t know.’ ”