Capital One is using a “Swiss cheese” approach, for which a combination of risk prevention software and alternative data is used to verify transactions, Head of Auto Refinance Allison Qin said. “You have to have a multilayered approach. One slice might have a hole in it, but if you have 20 slices stacked up, you’re less likely to make it through the stack of cheese.” — Allison Qin, Capital One. The lender uses Capital One credit card transaction history and biometric data in its proprietary fraud prevention models, Qin said. Auto lenders’ total estimated loss exposure from fraud reached $9.2 billion in 2024, a 16.5% year-over-year rise, according to risk management platform Point Predictive’s March 25 report. “Fraud is continuously evolving and getting harder to spot, so it’s imperative that dealers and lenders work together to solve [industry fraud],” Qin said. Like lenders, dealerships are implementing multiple fraud prevention systems. Morgan Automotive Group, with more than 75 retail locations in the state, uses an “eyes wide open” approach in which dealers are vigilant about identifying scams, Justin Buzzell, finance vice president of the group, said. For Morgan Automotive Group, those protections include: A red flags check, which looks at customer identification;
A Department of Highway Safety and Motor Vehicles check; A synthetic fraud check, which looks for mixes of real and fake information; A biometric scan; and Video records of all interactions with customers to show “we’ve done everything we could.” “If you pass all of that, we’ll sell you a car,” Buzzell said. Dealerships and lenders agree that notifying each other about fraudulent encounters helps the industry; however, there’s no easy place to do that yet, West American Loan Chief Executive and President Sean Murphy said. If a centralized portal, similar to e-contracting platform RouteOne, allowed dealers and lenders to share potential fraud signs, industry players could work together to stop scams, Murphy said.