Why auto loans sound like handy fruit for identity thieves
So-called “synthetic” fraud, where thieves create a false identity based in part on real customer information, is a growing problem in auto financing.
“Synthetics is a major problem in the market,” said Ken Allen, senior vice president, identity and fraud, for the Atlanta-based company. Equifax Inc., the consumer credit reporting agency.
The other two major credit bureaus are Experiential, with US headquarters in Costa Mesa, California, and TransUnion, Chicago. Credit bureaus keep and constantly update each consumer’s credit history. Lenders use the data to assess the likelihood that a person will repay a loan.
Ironically, part of what drives identity thieves to prey on auto loans is the fact that chip-equipped credit cards have made credit card fraud more difficult. This makes auto financial fraud a route of least resistance, experts said.
“Nothing is foolproof, but it’s definitely harder to masquerade as a physical card,” Allen said. Forbes.com during a telephone interview. “It’s a factor that has caused a limited number of bad actors to switch from card fraud to other means of monetizing customer data. “
To guard against synthetic fraud, he recommended that consumers consider putting a safety freeze on their credit history in the credit bureaus records. This means that no new lender can access your credit report – a preliminary step in creating a new account or taking out a new loan on behalf of that consumer – unless the consumer unblocks the account. (see related story)
It takes a lot of time and effort – probably years – for thieves to successfully take out a bogus car loan by establishing what looks like a good faith credit history. Identity thieves create credit accounts, typically purchase relatively inexpensive goods and services, and make payments on time, Allen said.
The same individual can create hundreds of fake accounts, experts say. What makes it a “synthetic” fraud is that thieves combine real consumer information with false information, critically including a bogus address where they receive reports.
“The IDs are real. Personally identifying information could be real. There are other components that are not real. It is the hybrid of the two. Usually, they are not created from scratch; it’s not from scratch, ”he said.