U.S. auto loan fraud increased over 16% last year

Car loan fraud in the United States has reached alarming levels. Last year, the amount of fraudulent auto loans increased by more than 16% to $9.2 billion. This figure represents about 1.3% of all auto lending in the country. Scammers are increasingly sharing their methods on social media. This has led to a rise in auto loan defaults, as fraudulent loans often result in missed payments. One type of fraud called "credit washing" is becoming more common. This involves credit repair companies filing fake identity theft claims to help people clear negative marks from their credit histories. The report reveals that credit washing appeared in 1.7% of loan applications last year. That is a 162% increase from the previous year. Frank McKenna, from the risk management firm Point Predictive, stated that credit repair scams are becoming widespread. They are being shared as standardized tactics online, which increases risk in the market. Point Predictive's data shows that about one in five auto loans was included in asset-backed securities last year. Investors are still cautious but are not panicking, even with rising risks from subprime loans, which are more likely to default. Most fraud cases involve misrepresenting income or employment, accounting for 42% of the total fraud by dollar amount. To combat this, Point Predictive uses various methods to flag discrepancies in borrowers' applications. Economic challenges like inflation and high-interest rates contribute to the rise in fraud, with social media playing a significant role in spreading these schemes. In addition to credit washing, scammers are also using "synthetic identity fraud." This involves creating fake identities by combining various false details. Together, these two fraud types made up over a quarter of all auto loan fraud last year. McKenna noted that the sharing of these fraudulent techniques on social media has greatly increased risks in the loan market.