The need to quickly replace a large number of vehicles in the aftermath of the hurricanes heightens the need for everyone in the process to be more careful.
The 2018 hurricane season produced yet another round of devastating weather for parts of the continental U.S. This past fall, Hurricanes Florence and Michael came ashore in the Carolinas and Florida panhandle, respectively, and both caused billions of dollars in damage to the Southeastern corridor.
According to Forbes, between 20,000 and 40,000 cars and trucks were damaged or destroyed from Florence, and another 10,000 were totaled from Michael. While this pales in comparison to the roughly 700,000 vehicles lost from Hurricanes Harvey and Irma the previous year, it still wiped out plenty of transportation that immediately needed to be replaced by families and businesses.
Indeed, in the aftermath of a storm of any magnitude, vehicles are often rendered undriveable and need to be replaced. Like many other critical aspects of daily life, such as food and water, people need transportation, and vehicles are usually replaced not long after a storm.
For the most part, this vehicle replacement activity is quick, with tens of thousands of people immediately needing to shop for vehicles in the weeks after the storm. This means people do research on dealer, Original Equipment Manufacturer, third-party shopping and review websites to select the car or truck that fits their needs.
This situation can also be a breeding ground for fraud, so everyone from the dealer, manufacturer and auto lender—including credit unions—need to be on high alert.
Today’s highly sophisticated fraudsters are everywhere. They can pose as dealers; they can hack into third-party sites and embed links that look like legitimate car ads; and they can even be masked as your friendly neighbor down the street willing to give you a great deal on a new set of wheels.
According to FOXNews.com, online car-shopping fraud in particular has occurred more than 29,000 times since 2014. Would-be buyers have been swindled out of more than $54 million as of December 2017, according to the FBI's Internet Crime Complaint Center.
Dealers and lenders are fighting back by leveraging highly sophisticated verification technology that helps identify fraud before it begins. This technology scans data and information on individuals before a deal is completed so that everyone involved can ensure the person sitting at the dealership – or in front of a computer at home—is exactly who they say they are.
This technology is even working to spot fraudsters who don’t even exist. Known as “synthetic fraud,” this type of activity occurs when an entirely false persona is created online via stolen or fake information for the purpose of fraudulently obtaining a vehicle – with no real person behind the paperwork at all.
According to the Federal Trade Commission, 1.7 percent of identity fraud complaints indicated that auto loans or leases had been generated fraudulently in 2017, up from 0.8 percent in 2015.
While big storms can heighten the volume of used car purchases in a region, fraud attempts happen all over. For example, technology thwarted an auto crime recently at a Michigan dealership.
In the attempted fraud ring scam, a woman visited a dealership with the intent to purchase a vehicle. When she presented her Texas driver's license, the dealership identified that the license information was synthetic after running a license scan in its customer relationship management system. When the same person made a similar attempt shortly thereafter at a different dealership that uses similar technology developed by Oplogic and Equifax, authorities made an arrest.
Using this system, dealers can generally identify fraudulent credentials early in the sales process—even before the test drive occurs. During the scan, the potential buyer’s license is verified by the Oplogic CRM software against Equifax data and fraud tools.
Such technology can prevent significant losses for the dealerships involved, but it also helps prevent millions in losses at financial institutions, which have large portfolios of vehicles across the U.S. Loss mitigation is a critical component of portfolio management at a credit union, and the ability to minimize fraud-related losses is a significant advantage for credit unions already dealing with thin profit margins.
With online activity increasing the chances for fraudulent activity during car shopping, new technology is stepping up to the heavyweight fight against crime. Fortunately for dealers and credit union lenders, advanced verification solutions are helping protect the customer journey as well as portfolio profits.cues icon
Lou Loquasto is auto finance and dealer leader with Equifax Automotive Services, and has 20 years of experience in the automotive industry. In his role, he is responsible for the team of auto industry veterans tasked with helping auto lenders and auto dealers grow while minimizing expense and controlling risk.