Traditional fraud prevention solutions are no longer enough to protect your business from the next generation of lending fraudsters. Let’s explore how lenders can balance thorough borrower analysis with quick decisions when fraud schemes become more sophisticated.
1. Increasingly Sophisticated Synthetic Identity Fraud
The industry faces growing synthetic identity threats. For example, in 2023, a 98% increase in synthetic identity attempts was recorded and since then the trend hasn’t changed. Point Predictive’s analysis has identified these four distinct categories of synthetic borrowers:
- Performing synthetics: Common in the subprime market, this first-party fraud is often used for credit-building by undocumented immigrants and many others. These individuals often intend to pay, but typically still end up defaulting.
- Staging synthetics: These fake identities start by performing well, thus creating and nurturing the account to maximize potential gains in a future bust-out. These are more common in prime and super prime markets.
- Criminal synthetics: Created with no intention of making payments. This tends to be the second phase of “Staging Synthetics”
- Sanitized synthetics: Old synthetic identities reused after washing credit through fake identity theft claims. Why go through the trouble of creating new identities when you can just wash established ones?
2. Economic Pressures
High vehicle prices and stagnant wages are straining affordability. This forces otherwise honest people to misrepresent income.
Even though dealership lots have restocked and vehicle prices have stabilized with typical manufacturer incentives returning, affordability remains a challenge. At the same time, based on the Manheim index, used car inventory remains limited, giving the customer even fewer choices.
3. Operational Efficiency as a Competitive Edge
With attention spans declining throughout the population, speed and on-the-spot decisions gain even more importance. According to our partner Open Lending’s industry survey:
- Only 5% of lenders can deliver instant decisions (in seconds)
- Nearly half take days to weeks for final decisions
- Manual stipulations (pay stubs, tax forms) are causing delays and increasing borrower drop-offs.
When dealers are waiting for loan terms from multiple lenders, response time becomes critical.
For instance, lenders such as Capital One and Ally can often provide instant approvals and win borrowers despite potentially higher rates. Traditional banks and credit unions, even with lower cost of funds and the ability to offer better rates, frequently lose opportunities due to slower response times.
Learn how your business can auto-approve more than 70% of valid applications with Point Predictive – book a live demo today.
4. Credit Repair/Washing Fraud
Credit Privacy Numbers (CPNs) are nine-digit numbers that scammers market as legitimate alternatives to Social Security Numbers (SSNs), particularly targeting people looking for a “quick fix” to repair their credit.
The Point Predictive team has been monitoring fraudster communities for years to pick up on new threats early. And in terms of Credit Privacy Numbers, here’s what we’re seeing:
- Over the last few years, 20x growth in usage of “CPN” on criminal networks postings on Telegram
- A well-known CPN sales website claims to have sold one million CPNs at an $80 minimum each.
Fraudsters market these as government-issued alternatives to SSNs that grant quick fixes for bad credit. Here are some of the biggest red flags to pay attention to:
- Incomplete data or inconsistent credit history
- SSN flagged as deceased invalid or unissued by the Social Security Administration
- Borrower reluctance to provide personal details or traditional documentation
- SSN belongs to another individual or the borrower has been seen using different SSNs previously
- The presence of fake tradelines.
Credit Washing Trend Since 2017
The problem of credit washing accelerated after 2017 when the FTC removed the police report requirement for identity theft claims. Since then, only an affidavit is needed to claim identity theft. And while this helped reduce police department workload and made it easier for true victims to claim identity theft, this action set off worrying trends as noted in the FTC’s Consumer Sentinel Network Databook.
- Pre-2017, the FTC reports indicate an average 12% yearly increase in identity theft claims
- Post-2017, there is an approximately 75% yearly growth in claims.
This process led to an 85% spike in suspicious credit washing alerts by the end of 2024 — the highest risk level Point Predictive has observed yet.
The increased false identity theft affidavits increased faulty approvals, financial losses, systemic risk, and operational strain – for both lenders and dealers.
The higher default rate and trust erosion can only be overcome with transparent, easy-to-use, instant identity, income, and employment verification.
Lender’s Protection™ and Point Predictive Integration that Addresses Modern Fraud
To fight these trends, we’ve partnered with Open Lending to roll out a new integration of IEValidate™ with the Lender’s Protection™ solution by Open Lending.
The integration allows for instant income and employment validation, enabling lenders to waive unnecessary stipulations for 70% of their applicants, creating a more seamless experience for borrowers.
Since going live, Open Lending has processed more than 10,000 loan applications and demonstrated significant improvements to the status quo:
- 34% reduction in stipulations
- 21% increase in bookings
- Ability to detect 60-80% of income inflation
- Coverage for both new and refinance auto loans
Lenders Protection by Open Lending with Point Predictive’s IEValidate automatically flags mismatched or fabricated data in applications managing risks without adding friction before loan approval or rejection.
Next Steps to Maximize Fraud Prevention Efficacy
To address new and advanced fraud challenges in 2025, lenders must remain proactive while relying on strong loan processing automation partners. This is the only way to keep up with the most up-to-date threats fraudsters are posing.
There are things you can do in-house to fight credit manipulation and the significant risks it drives through methods like synthetic identities and credit washing. Here is what you can do to maximize the chances of catching fraudulent loan applications:
- Leverage alternative data – gain a clearer perspective on who the consumer really is. Examine when they started reporting, whether they’re using fraudulent data points or schemes, and if they’re piggybacking on others’ good credit history
- Collaborate with other lenders – work with peers through our loan risk data consortium to identify common synthetics and fraud patterns. If you’re experiencing certain fraud attempts, others likely have encountered similar synthetic identities before
- Educate your members, customers, and team about fraud detection and prevention
- Analyze credit history over time – identify when scores are artificially inflated or trade lines are being removed suspiciously quickly.
As challenges continue to evolve, operating without meaningful reform becomes increasingly dangerous. Lenders can navigate these challenges by adopting more advanced tools and strategies that allow them to maintain trust, liquidity, profitability, and key performance indicators.
If you’re ready to see the joint solution by Open Lending and Point Predictive in action, drop us a line, and let’s start a safer era for your business.
We’ve based this article on this insightful webinar hosted by Kevin Filan (SVP of Marketing, Open Lending) and Justin Davis (VP of Product Delivery, Point Predictive).
