How ‘credit washing’ and fake IDs are boosting auto loan fraud

Sometimes, the fraud involves manipulating a credit file to make the borrower appear less of a risk. It’s a term called ‘credit washing.’
Fraud losses in auto loans were 21 times higher than those involving credit cards, according to a new analysis from TransUnion, which was released this week.
Auto lenders are increasingly running up against unscrupulous borrowers and others who use goosed up credit scores, as well as fake identities, to take out car loans that many have absolutely no intention of paying back.
“As the auto lending landscape becomes more digital and interconnected, the risk of fraud is no longer isolated to fringe cases,” said Satyan Merchant, senior vice president, auto and mortgage business leader at TransUnion.
Merchant told the Detroit Free Press that he recently met with a group of auto lenders — including in-house finance arms of automakers, independent banks and others — and asked them to disclose what a major concern is right now.
More than half, he said, indicated that fraud was No. 1 on their list. When Merchant raised the question five years ago at a similar gathering, he said, the fear of fraud was far less widespread in the industry.
While fraud itself isn’t new, it seems as if crime rings, everyday consumers and others have more tools and information for attacking an auto lender’s blind spot.