Dealers, lenders invest in fraud prevention amid credit washing surge

Auto lenders and dealerships are adding multilayered prevention tools and closing deals with third-party vendors to fight a surge of credit washing and synthetic identity fraud. Columbus, Ohio-based Huntington Bank , for one, is eyeing analytical tools to manage and prevent fraud, Steve Franzel , managing director of vehicle finance, told Auto Finance News during the recent 2026 AFSA Vehicle Finance Conference in Las Vegas. “We’re doing a good job around [fraud detection] today, but there’s an evolution there,” he said. “We have to continue to keep that front and center.” Auto finance industry fraud exposure is projected to reach $10.4 billion in 2026 , according to risk management platform Point Predictive . That is up 500% since 2016, Frank McKenna , co-founder and chief fraud strategist at Point Predictive, said at AFSA. AI and other digital tools have made fraud easier to commit , so auto lenders and dealers need to focus on fighting back, Hyundai Capital America Chief Executive Jim Drotman said at the event. “Fraud is a concern. … It’s something that we’ve got to all be aware of and work to figure out ways to combat.”— Jim Drotman, Hyundai Capital America CEO Uptick in credit washing Credit washing may be responsible for some of the increase in fraud exposure, Point Predictive’s McKenna said. Credit washing is when consumers’ credit scores are inflated as a result of them falsely claiming identity theft to remove legitimate tradelines. The Consumer Financial Protection Bureau received a record 520,454 credit bureau complaints from consumers in December 2025, according to the CFPB Complaint Database. Complaints by date received by the CFPB [caption id="attachment_58359164" align="alignnone" width="1273"] (Courtesy/CFPB)[/caption] The jump in credit bureau complaints could signal an increase in consumers petitioning the CFPB to remove negative, legitimate tradelines, McKenna said during the session. “CFPB complaints for credit bureau disputes used to be around 80,000 cases a month. … [In December] it hit a historic high of 520,000 … That’s 6 million Americans a year that are participating in credit washing and expunging trade lines, so that’s what’s driving a lot of this risk.” — Frank McKenna, Point Predictive The CFPB issued new rules Feb. 4 requiring customers to first dispute information with credit rating agencies directly, according to the CFPB. Consumers must give rating agencies 45 days to respond before filing a CFPB complaint and attest to the truth of the information they provide. Prevention To prevent fraud, Renton, Wash.-based Car Pros Automotive Group has adopted a multilayered approach, Chief Financial Officer Shirley Jones told AFN . The dealership group’s fraud prevention process, she said, includes: Using third-party fraud prevention vendors; Checking applications with identity and income verification tools; Regularly training staff on fraud red flags internally; and Working with law enforcement when necessary. “Protecting the integrity of each deal protects both the company and the customer.” — Shirley Jones, Car Pros Automotive Group CFO AI-powered auto lender Lendbuzz also developed internal prevention tools and closed deals with vendors to prevent an uptick in synthetic identity fraud , Chief Executive Amitay Kalmar told AFN during NADA. Synthetic identity fraud, in which fraudsters combine real and fake information, will likely continue to grow, Kalmar said. Collaborating for prevention Dealers and lenders are also considering collaborating to combat fraud. More than 90% of surveyed lenders and dealers said consortium data for fighting auto finance fraud would be valuable, according to an Experian report recently shared with AFN . The report surveyed 204 auto lenders and 125 auto dealers. [caption id="attachment_58359163" align="alignnone" width="801"] (Courtesy/Experian)[/caption] Additionally, more than 90% of lenders and dealers surveyed said they would be willing to share verified fraud cases or trends, according to the report. Increasing vehicle prices make vehicle fraud more profitable for scammers, and therefore, more appealing, Experian Senior Director of Product Marketing Jim Maguire told AFN . Before, “businesses thought of [fraud] as a cost of doing business,” he said. “They’re now seeing [fraud] rising at such a rate that they need to be more proactive about addressing it.” — Additional reporting by Amanda Harris Auto Finance News will present multiple invaluable events for industry professionals in 2026, starting with Auto Finance Summit East and Auto Finance Capital Summit in May. To see event agendas and register, visit autofinance.live .

Federal Reserve announces emergency meeting on auto lending regulations • Click for details

MARKET SNAPSHOT

Risk Management

Dealers, lenders invest in fraud prevention amid credit washing surge

Related Posts

Lenders eye expanded leasing options as affordability challenges grow

Forward-flow picks up steam as private investors eye auto finance

Dealers fight growing transport fraud, when scammers impersonate shipping companies

Auto finance dealer strategies evolve as profitability tightens in 2026

Bank of America consumer vehicle net charge-offs tick down

CarMax Auto Finance originations down 1.5%

Wells Fargo Auto originations soar 110% YoY

Chase Auto originations down 3% YoY

Daily Intelligence Brief

Sponsored

Why credit unions give dealers an edge in today’s auto market

Driving better decision-making across auto finance operations with SAS

Auto finance’s first line of defense: Raising the standard in integrated software partnerships and data strategy

Driving Innovation in Automotive Refunds: How Onbe and Allied Solutions Are Modernizing the Payment Experience

Navigating the Margin Squeeze: EVs, Tariffs & Pricing — A Q&A with Earnix

Enhancing credit approaches to boost conversion and dealer loyalty

Tesla announces new fleet financing program

About

Company

Daily Newsletter