Phantom auto loans are a sophisticated scheme to defraud banks, credit unions, and fincos. No car is ever sold. Often, no actual dealership is involved. Fraudsters have cooperated to fabricate seemingly legitimate auto loans that have already robbed lenders of many millions of dollars.
What are the straw buyer red flags that lenders can use to identify fraud and prevent it from hurting portfolio performance? Any one or more of these characteristics are often the most obvious indicators of straw buyer fraud.
Down Payment Fraud Detection Key Points:
1) Loan fraud is on the rise with false identities as a leading scheme
2) Substantial down payments help disguise a fraudulent loan application
3) Lenders need to employ fraud analytics to identify and decline fraudulent loan applications
Fraud has many faces. Auto dealer loan fraud isn’t as frequent as income, employment, or identity fraud by individuals and fraud cartels. Still, an application from a less-than-honest dealer can show up in the underwriting queue anytime.
The most painful way to learn about auto loan straw buyers is to become their fraud victim. According to PointPredictive, …