Yes, it’s true, more people are shopping and buying vehicles online. It’s obviously convenient, but there are still plenty of threats of fraud to be on the lookout for – fraud that can harm both the consumer and the dealer/lender. Online scams are widespread today and can take the form of fake ads, gift card rip-offs, fraudulent wire transfers, title washing, curbstoning, identity theft, synthetic fraud, fake escrows, payment plans and phony checks.

The other truth is that fraud also still happens inside the physical dealership. According to the experts at Point Predictive, there was $1.78 billion worth of fraud in vehicle retail in 2020.

The company also pointed to a trend where 70% of dealers said customers misrepresented themselves or their income; or used fake paystubs during the shopping process. This type of activity doesn’t just happen online, it can also happen at the dealership – and it’s largely avoidable.

The prevention of synthetic identity fraud is not an exact science, and the vast majority of dealers today believe they are taking necessary measures to prevent this type of theft or make statements such as “my lenders need to worry about Synthetic Fraud, I don’t”. However, a closer look at these procedures leaves many experts in the industry scratching their heads in disbelief.

Just Scanning a Driver’s License Is No Longer Enough

Currently, most dealers utilize scanning technology to scan a person’s driver’s license to satisfy compliance, procedural checklists and to OCR the data to populate the CRM at the time of loan application or even during a test drive. While this process is critical, it lacks a significantly critical element that can potentially prevent or even thwart the vast amount of synthetic fraud attempts.

Scanning of the driver’s license is important, but dealers must also utilize verification technology to validate the driver’s license and the person’s true identity. This additional step helps to validate the individual via address verification, red flag, OFAC, synthetic fraud checks, and even bouncing it off the State’s databases to verify that it is an active license. It is estimated that 95% of dealers today still don’t include this verification step in their process.

With the proliferation of more digital and online shopping, the verification and validation of one’s identity is even more critical when a potential fraudster is sitting in the privacy of their own home filling out a loan application. Mobile and ID scan technologies are now widely used in online banking applications, and these could significantly help dealers during an online transaction.

Simply scanning a DL isn’t enough, and this misstep is costing dealers and lenders billions. According to the FTC, retail businesses lose billions of dollars annually when fraudsters purchase or return goods by using counterfeit driver’s licenses. Fraudsters have become increasingly sophisticated, and are able to replicate state driver’s licenses, that are NOT embedding state-of-the-art security features implemented by the states.

The Process Is Easy, and Customers Will Appreciate It

The right process is a simple addition to a dealer or salesperson’s regular workflow. Using a link sent by the dealer to a customer’s mobile device, the customer is guided through the process of capturing their document and selfie. Facial recognition software checks the selfie against the image on the driver’s license to determine a match. The driver’s license is scanned and run through rigorous data and document recognition checks to determine its authenticity. The authenticated information obtained from the license is then run against Identity Verification tools to find evidence of fraud.

An Extra Five Minutes Should No Longer Be Considered “Friction”

Dealers might feel this additional step creates friction during the transaction or that inconsistent performance will add unnecessary steps to the sales process. However, millions upon millions of online transactions in other e-commerce platforms take place each day, and the average consumer now expects this additional layer of security to be a part of any online transaction – especially one that involves their second-largest purchase aside from the home mortgage itself.

Synthetic identity fraud continues to be a growing problem today for dealers and lender partners across the entire dealership spectrum. It is important to have thorough training, and for all employees to have a higher level of awareness for the potential of synthetic identity fraud. It is also important for dealers to implement what’s now considered everyday technology that is no longer viewed as friction by the consumer. While instincts are important, it’s even more critical to have access to the right tools and sophisticated technology that can help dealers and lenders spot synthetic identity fraud before it happens.

About The Author:

Ken Hill is managing director for 700Credit, the industry’s leading provider of credit reports, compliance, identity verification and soft pull products. For more information, please visit