Better cybersecurity has put a dent in the rate of growth in so-called synthetic identity theft in auto finance, but it’s still a growing problem, according to credit bureau TransUnion.
“Growth has at least flattened,” said Greg Pierson, CEO of iovation, a TransUnion subsidiary based in Portland, Ore., that specializes in tracking “device intelligence.” That is, the internet “reputation” of a particular electronic device, based on its history. Chicago-based TransUnion acquired iovation last year.
For legitimate consumers, slower growth in synthetic identity fraud is good news, Pierson said in a phone interview Oct. 7.
Greg Pierson, CEO of iovation
Photo: iovation
For starters, lenders pass on the cost of bad auto loans to consumers. In addition, if lenders can be more confident who they’re dealing with, they can remove “friction” from the finance part of buying a car — extra steps designed to confirm an applicant’s identity, he said.
Synthetic identity theft is where a fraudster assembles a legitimate-looking identity using pieces of a genuine consumer’s data, like their social security number. The fraudster starts out small and makes purchases, say, on a gasoline credit card. They make up-to-date payments, add more credit cards and more debt, until they have enough credit history to get a car loan.
That’s when fraudsters “bust out,” experts said. That is, the fraudster sells the car, keeps the proceeds, and disappears. Security experts said if that happens, legitimate consumers shouldn’t have much trouble proving they’re not liable for a car they didn’t buy.
However, being the victim of identity theft is a nuisance at best and potentially a major headache, if it’s necessary to get a damaged credit history corrected.
According to TransUnion, outstanding automotive balances suspected of being synthetic identity theft accounted for $630.5 million as of the second quarter of 2019. That’s an increase of just 1.4% from a year ago, the credit bureau said. A year earlier, that number had increased 5.3%. To put that in context, total outstanding automotive balances are higher than $1 trillion.
Pierson explained iovation can detect whether a particular electronic device like a mobile phone has been used in the past in a fraudulent transaction — or even whether a device is closely associated with another, different device with a bad “digital device reputation.”
That’s another layer of security, on top of traditional double-checking of a person’s name, social security number or other personal identifying information, he said.
“For example, you could tell if this device was used to apply for 15 loans in the past however-many days,” Pierson said. “You would get a warning that says there is massive risk here of synthetic identity theft.”
