How to change the odds in your favor against application fraud

When the numbers just don’t add up …

It could be an honest mistake or a misunderstanding.

Or it could be fraud, specifically, application misrepresentation, according to a dealer brochure developed by the Enterprise Fraud Management team at Santander Consumer USA.

A good time to figure that out is when the customer applying for financing is sitting right in front of you.

091818 IL What you need to know about fraud risk – and why you should care_V4


“Only about 15 percent of auto loan fraud is identity theft,” wrote a fraud strategist from PointPredictive consulting firm. “So if your only fraud control is checking a driver’s license or Social Security card, then you are really only addressing a small fraction of the risk.”

The risk with every auto finance application also includes:

  • Income fraud in which a borrower lies about his/her income.
  • Employment fraud in which the borrower lies about employment, work history or job title.
  • Document fraud in which a borrower falsifies pay stubs to substantiate income claims.


PART 1: What you need to know about fraud risk – and why you should care

PART 2: Identity fraud can take ‘enormous toll’ on your dealership profits

And the more finance applications your dealership submits, the greater your chances of falling victim – unless you take (or have taken) steps to change the odds in your favor, of course.

SC’s Driving a New Model | A dealer guide to recognizing the warning signs of fraud, identifying suspicious buyers and taking action to reduce costs suggests what to look for and how to reduce application misrepresentation risk at your dealership:

The Red Flags

  • Income inconsistent with local salary rate.
  • Business revenue inconsistent with personal or self-employed income.
  • Income that seems inappropriate for the applicant’s age or the employer.
  • Non-existent employer, unfamiliar employer name or no longer employed.
  • Address is a P.O. box, drop box or mail forwarding address.

“It’s quite common for employment information to be fabricated during the auto-lending process,” cautioned the PointPredictive consultant.

And the Checklist

  • Pay attention to buyer behavior, such as nervousness or indirectness in answering questions.
  • Pay attention to application details by comparing application information to the credit bureau report – do the trade lines seem appropriate with the applicant’s stated income and position?
  • Ask for income verification via pay stubs – make sure they’re genuine – or other documentation. Call employer phone number and contact references.

“Santander Consumer USA (SC) is committed to working with dealers to raise awareness of fraud … in the retail auto space,” says the company. “[And] watching for red flags is the most cost-effective way of preventing fraud and reducing expenses related to fraud, reputation, regulatory and financial risks.”

This series, Driving a New Model, is aimed at helping dealers spot the red flags for identity fraud, application misrepresentation, straw buyers and elder abuse, and includes actionable checklists.

Posted in News

Written by

Enjoy this Post?

Remember to subscribe to our RSS Feed and if you would like, please share this post.

Comments are closed.