Auto Lenders' Fraud Exposure Rose in 2022

PointPredictive, a provider of artificial intelligence and machine learning fraud solutions for the lending industry, released its 2023 Auto Lending Fraud Report. Leveraging over 23 billion unique risk attributes spanning more than $2.6 trillion in scored applications, the report examines auto lending fraud trends over the past year.

At the heart of Point Predictive's analysis lies its proprietary derived data repository, which aggregates AI and ML-generated data insights from its consumer data and third-party sources. The lender-deidentified resource encompasses 23 billion risk attributes covering credit-visible and credit-invisible populations. With a nationwide reach, the data source drives Point Predictive's models and solutions and is the basis of the report.

Key findings include,

• To date, up to 1 million new fraudsters became active in 2020 after economic stimulus programs were launched. In 2022, there was a shift toward fraudulent vehicle financing.
• The auto lending industry faced over $8.1 billion in origination risk exposure in 2022, representing a $400 million increase compared to the previous year.
• Synthetic identity and identity theft have increased by 45% since 2018, synthetic identity fraud rising by 12% in 2022 alone. The estimated total identity risk for the year reached $2.3 billion.
• Affordability risk has risen by 52% since 2018, reaching its highest level and leading to increased stress on borrowers and higher early payment default rates associated with fraud.
• Traditional forms of fraud, such as income, employment and straw borrower fraud, decreased in 2022. However, professionals continuing to engage in income and employment fraud are utilizing more sophisticated tactics, including well-hidden fake employers and advanced paystub forgeries.
• New fraud schemes, such as Zombie Debt Reassignment, have emerged that feature highly disguised fake tradelines and require constant improvement of strategies, operations and technological responses to combat evolving fraud patterns.

"To truly understand fraud, you must look at many details in the data submitted on the applications to lenders and dealers. Looking at that data in aggregate, you can precisely identify how fraud trends are changing over time. That is what we do with our annual fraud report each year – expose those trends to the industry," said Frank McKenna, chief traud strategist at Point Predictive.

"We look at billions of data points from applications and then tie that back to what gets reported as fraud, early pay default, as well as what red flags existed at the time of scoring. With this networked and holistic view of auto risk across the industry, we can provide a unique perspective of how risk is trending."

To download the report, click here.

Originally posted on Auto Dealer Today