In recent times, auto loan fraud in the US has been increasing. The 2022 Auto Fraud Trends Report stated that the car loan scams went beyond $7.7 billion in 2021. If you look carefully, there has been an increase in synthetic identity fraud. It is also known as “Frankenstein fraud”, which creates real credit scores and makes them highly difficult to distinguish from real identities.
According to the Federal Trade Commission, synthetic identity fraud today is responsible for 80% to 85% of all identity fraud. In the auto sales domain, this fraud makes it highly challenging for the dealership to authenticate customer identity, approve their creditworthiness, and close sales deals quickly.
Auto dealers today suffer most from fraudulent activities. Several lenders need the dealers to purchase back deals associated with identity theft. One mistake can lead to a costly error. Hence, the auto dealerships must stay tuned in to the changing fraud trends. In this article, we will discuss three ways for the car dealership to avoid such loan scams.
Check the Credit Report Discrepancies
A large number of auto customers have inconsistencies in their credit reports. Such mistakes can vary from instances of identity theft to errors between individuals who have a common name or similar social security numbers. Considering the prevalence of such mistakes, it’s expected that the purchaser’s credit report will reflect data that doesn’t sync. Fraudsters use such imperfections to plant their attacks.
Majority of customers have a handle on their credit history. It means that if there’s anything incorrect, they can communicate about what went wrong and the reason for it. Therefore, if you come across a discrepancy, refrain from making assumptions. Check whether the explanation is worth all the risk.
If you come across many credit inquiries within a few days, it is a sign of trouble. Even an avid car buyer wouldn’t allow every dealership to run an in-depth inquiry on the credit history. But when it is about a person in an online scam, they can press for several credit inquiries, to check if they can make others feel that they are a credible buyer.
Opt for Customer Due Diligence
Today, most car dealerships have realized the importance of CDD (Customer Due Diligence). As the name suggests, it is a process to be watchful about a person by investigating and validating data about their identity, business, and financial activities. Collating and authenticating data about a consumer is carried out when developing a business connection, before the onboarding process.
For instance, a bank might need to verify a customer’s passport before enabling them to open an account and deposit money. Hence, even for CDD, there is an ongoing management of these activities to come across red flags or changes that can point toward a heightened risk of illicit activity.
AU10TIX states that this process effectively functions as a catalyst by making organizations aware of the risks. The findings here are done routinely to arrive at operational decisions and make investments. Today, there are leading names in this niche that provide a completely automated KYC process. There aren’t any geographical limits, and the verification processes are fast and hassle-free.
Say Yes to Innovative Technologies
Fraudsters and scammers are always enhancing their skills. Hence, car dealerships must be aware of the solutions that help provide a solid and safe purchase process. Technology is evolving fast, and transactions are becoming digital. Hence, there is a need for solutions that authenticate its integrity and compliance.
Identity verification is an essential aspect of any notarization. Several dealers need notarization of restricted power of attorney to register the title in place of the buyer. Digital notarization can authenticate the signer’s identity, record the overall notary session, track the signer’s ID, and offer a compact audit trail that dealerships can access. It helps to shield against any deceitful activities and is helpful for any problems related to the transaction.
However, along with embracing new technologies, you must also focus on manual processes. When you make both work in your favor, that’s when you can keep your business safe.
In conclusion, similar to any business, an online auto dealership will have its own set of challenges. Scammers are waiting to plant their attacks and rob your business of its profits and reputation. Therefore, there is a need for safety measures that can keep your car dealership secure. The tactics mentioned above can be useful and ensure that your business is safe and sound.
