Auto finance fraud is on the rise, according to report by the National Insurance Crime Bureau, affecting dealerships, lenders and insurers alike.

The nonprofit organization said that organized criminal networks have shifted their focus from traditional vehicle thefts to auto finance fraud. Exposure to this type of fraud reached an estimated $10.4 billion, but the bureau projected the losses will rise throughout the year.

According to the report, first-party fraud accounts for nearly 70% of all vehicle finance fraud. That's when “individuals or fraud rings misrepresent income, employment, or repayment intent using their own or synthetic identities.”

The bureau said that an estimated 80% to 85% of identity-based auto financing schemes use synthetic identities. And borrowers who are flagged as likely synthetic identities are about 13 times more likely to default than typical consumers, average losses between $22,000 and $50,000 per case.

Earlier this year, a survey by eLend Solutions showed nearly half of surveyed dealers cited bogus driver's licenses as the top reason for the increase in auto purchase fraud.

In a separate study by Experian, dealers said their efforts to prevent fraud can cause friction in otherwise smooth consumer transactions.

“The best defense is simple: confirm identities upfront using multiple data sources, verify income and employment early, validate trade-in vehicle details so clean deals move quickly, and flag anything that doesn’t add up,” said Experian Senior Director for automotive Jim Maguire.

The crime bureau listed other “key schemes and emerging vulnerabilities” at play:

• Applicants submitting inflated or artificial intelligence-fabricated pay stubs
• Credit washing, “bad actors submitting forged [Federal Trade Commission] dispute affidavits and police reports claiming identity theft to suppress derogatory trade lines and secure fresh auto financing”
• A disconnect between enforcement and reporting because “current federal crime definitions exclude fraud and forgery-based acquisitions from motor vehicle theft statistics and focused enforcement efforts”