Car buyers are putting fake employers on their loan applications as of late. Over three years, an estimated 5,000 fake companies have been conjured to get around impediments the applicant might have in getting financing. The amount of loans is over $1 billion. 

Sometimes these fake employer car loans aren’t caught right away

This comes from a fraud screening firm called Point Predictive. It helps police applications sent to lenders, along with other e-commerce and retail investigative matters. According to Automotive News, sometimes these loan scams were caught during the application, but sometimes not until after the loan had been cleared. 

“The rise in the use of fake employers on credit applications is astounding, and the $1 billion threshold only proves the growing threat of this problem,” Point Predictive senior fraud analyst Justin Hochmuth said in a statement. “We’re uncovering about 100 new fake employers that are being created each week.” Who knew?

Why are there these kinds of car loan scams?

So why are some prospective buyers doing this? There are several reasons besides the obvious. One reason is that some lie to finance a string of vehicles to be used to sublease or rent out. This is especially true now, with rental companies not able to flesh out inventories, causing a rental shortage. 

Another reason is that some sketch credit repair businesses promote listing a phony employer for applications as a means to repair their credit scores. They even provide fake employer paperwork to create your own fake company. “You can throw up a credit repair company in a day,” says Point Predictive chief strategist Frank McKenna.

Why is this happening now?

He said that the past couple of years has seen credit fraud soar due to higher interest rates and the lack of both new and used vehicles. Fraud tends to increase during the tax season because there is more demand for loans and repairing credit. 

The big problem for car dealers is that 30 percent of these types of fake employer loans end up getting charged off. And 60 percent of those that were charged off did so within six months. So the loan company ends up unable to collect almost immediately upon the loan being completed. In some cases, the debt might be turned over to a third-party collections company, which then pursues collection. 

Some telltale signs that a loan application might involve a phony employer are those that list yearly income in the $65,000 to $80,000 range. “They never want to make it look too much or too little,” McKenna says. The range of employment is usually about three to five years. And the profession or position title is usually “manager” or “office manager.” 

Here’s some suggestions for car loan officers

McKenna suggests that loan officers ask casual questions about what the person does for a living. Sometimes asking about weekly pay is good because they can’t remember what the annual amount breaks down to. And finally, check out the “employer’s” site. It usually becomes obvious that it is not a real company. That, or it just needs a much better website.

The states this most likely will happen based on the car loans per capita have been Georgia, Texas, Washington D.C., Nevada, and Illinois. And Texas has the highest loan values, by far, associated with employment fraud. 

What cars are most likely to see this used to purchase. Number one is the Dodge Charger. But the Nissan Altima, Hyundai Elantra, and Chevy Malibu follow right behind. In the end, it never ceases to amaze how rampant and creative fraud can be.