Auto Loan Lenders Slammed by Record Synthetic Identity Fraud Losses

How the Fraudster Operated
Synthetic identity fraud, a method where criminals fabricate new identities using real and fake personal data, is now the number one type of auto lending fraud, according to a bombshell report by Point Predictive. These fraudsters blend real Social Security numbers—often stolen from children or the elderly—with fictitious names and birthdates to create convincing credit profiles. They then apply for auto loans, buy vehicles, and vanish before any red flags are triggered.

What Red Flags Were Missed
The fraud is often undetected in the early stages because these synthetic profiles can build up strong, seemingly legitimate credit histories. Traditional fraud detection systems miss the cues because these aren't stolen identities—they're new, fabricated ones. Credit bureaus and lenders see a consistent borrower profile, unaware it's been built from fiction.

Who Paid the Price
Auto lenders bore the brunt of this surge, with an estimated $7.9 billion in synthetic identity fraud losses reported in 2023 alone. Dealers, especially those without robust identity verification tools at the prequalification stage, were left holding the bag when these vehicles became unrecoverable.

What Could Have Stopped It
Early identity verification—before a credit pull—is one of the few defenses against synthetic identities. Most systems validate credit data, not identity data. By verifying a consumer’s phone number and matching it with real, authoritative identity data upfront, lenders and dealers can stop these fake personas before they reach the finance office.

Insight for the Reader

At FlexPath, we designed VeriQual™ to be the first line of defense against this exact kind of fraud. By verifying the consumer’s identity before a soft credit pull—even if they’re using a seemingly valid profile—VeriQual can flag synthetic fraud attempts in real time.

Look for the VeriQual badge when getting prequalified for financing— Because who you are matters just as much as what you qualify for.™