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Two newly released reports—Point Predictive's "Perfect on Paper" and SentiLink's 1H 2026 Fraud Report—show auto lending fraud evolving in ways most dealers and lenders may not be watching closely enough.
The good news?
These concerns come with specific, catchable warning signs.
So… Here are the fraud types worth training teams on, how fraud shows itself in auto vs. other industries, and the licensing rule change that took effect in March.
Straw borrower fraud is climbing to record highs.
Point Predictive, a San Diego-based fraud detection agency, has tracked eight straw-borrower alert signals via its Master Straw Borrower Index, which climbed 37.6% from August 2023 to July 2026, hitting an all-time high of 142.0 in December 2025.
A straw borrower is harder to spot since it's someone using their actual identity.
Frank McKenna, co-founder of Point Predictive, explained why in the report.
"A straw borrower is the hardest kind of fraud to see, because everything on the application is real,” McKenna said. “The name is real. The Social Security number is real. The credit checks out. The only fraud is who gets the car."
Frank McKenna
Point Predictive
The scary part: Straw borrowing now accounts for about $600 million in losses per year for auto lenders, with losses expected to stay elevated through year-end.
Point Predictive shared straw risk signs to watch out for, such as the disappearing co-borrower, also known as someone who previously applied with a co-signer but is now applying solo. (Especially if they pop up at a different dealership.)
Or someone zipping around town hunting luxury cars, submitting 20-plus applications for three or more high-value vehicles in a short window.
And, be wary of anyone who frequently shops out of state, because early payment default jumps from 4% to 20% by a borrower’s fifth out-of-state funded loan.
Other potential risks:
Risky co-borrower patterns. Loans with a co-borrower previously flagged for fraud default early at 3.2 times the baseline; a "role swap," where a declined pair reapplies with the names reversed, defaults at 2.6 times.
Potential elder exploitation. Default risk climbs with every decade of age. Borrowers 75 and older default at 5.1 times the rate of borrowers under 25.
Vehicle and borrower mismatch. A vehicle choice that seems wildly out of character for the borrower.
The report also includes a broader checklist of 21 individual smaller, specific red flags to notice, rather than the fuller patterns described above.
Here are a handful:
Watch out for recently spiffed up credit. For instance, people may add an authorized user to create a sudden, artificial score jump right before the application.
Beware of things such as the person’s given employer phone number ringing to a personal cell. Similarly, watch out for the same number popping up on other applications under different names.
Changing details about income, employers, or addresses warrant a closer look.
Look closer if the down payment comes from an account that isn’t on the contract.
If the customer starts stacking up add-ons with no negotiation, and the amount financed sits near the max advance, that’s a red flag.
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Customers are lying about themselves more than fraudsters are stealing identities.
SentiLink is a San Francisco-based identity verification company.
In its 1H 2026 Fraud Report, the company found something true of no other industry it tracks: Auto lending is the only sector where first-party fraud (5.31%) outpaces identity theft (4.51%).
Here’s why: With credit cards, telecom, home equity, etc., stolen identities pose the bigger threat.
But in auto dealerships, the person applying is usually who they say they are; they're just lying about something else.
Charlie Custer, lead researcher for SentiLink, said during a related Sept. 11 webinar that in-person transactions can allow for unintentional vulnerability.
“Dealers are incentivized to sell," Custer said, adding that because dealers sometimes sit in the middle of the transaction, occasionally typing the application themselves, there's more room, (intentional or not), for income or other details to get misrepresented.
Charlie Custer
SentiLink
Related: If dealers check anything in F&I, it should be the phone number and Social Security Number.
A mismatched SSN was the biggest tell in 84.7% of fake-identity cases, while stolen identities usually gave themselves away through a phone number that wasn't the applicant's.
Other notes to consider:
Since a driver's license doesn't show a SSN, a fraudster can hand over a real, valid ID but pair it with a fake SSN. (Meaning, there’s no need to invent an entire fake identity.)
Fraud spikes tend to follow predictable moments, not organized rings.
SentiLink flagged a spike in fraud activity tied to Presidents' Day, for instance, when dealer sales incentives collide with tax-refund season.
"First-party fraud is more of an individual act," Custer said. "It's not something that fraudsters organize and do together."
What dealers should watch for:
A fraud dispute isn't always real. A customer can rack up a high balance, then falsely claim identity theft to get the loan erased. If it goes unchecked, they get away with it.
The (fraudster) kids are not alight: Unlike identity theft, where victims tend to be older, first-party fraud applicants trend younger.
Licenses and SSNs need a separate check since the ID alone doesn't confirm that the SSN paired with it actually belongs to the holder.
A licensing rule change is creating a whole new pool of fraud targets.
A federal rule that took effect in March limited who can hold a non-domiciled commercial driver's license, a document issued to foreign nationals who are here legally, but not permanent U.S. residents.
About 194,000 license holders are expected to exit the freight industry over the next five years, according to SentiLink's webinar, and many are expected to leave the country.
What to watch out for at the point of sale:
A years-long gap in someone's address history, followed by a sudden reappearance in a new market. SentiLink flagged Los Angeles, and increasingly Miami, as hotspots for this pattern.
When someone with this kind of license exits the country, their identity stays behind. And it's often tied to a real SSN, a real trucking LLC, and real credit, making it a thief’s dream. (SentiLink calls this "assumed identity abuse.")
For those at risk of losing the license, some are maxing out credit before they go.
Adding to this, fraud rings have separately been exploiting mechanic's lien sales (the legal process letting repair shops auction off a vehicle to recover an unpaid bill) to strip liens off financed cars and cash them out, according to SentiLink's webinar.
SentiLink said it's about not getting duped by the person who snags the identity, not distrusting non-domiciled CDL holders as a group. (In fact, there's no data showing higher fraud rates among them generally.)
The bottom line: Like the industry itself, fraud cycles rise and fall. And fraudsters always find new ways to behave like bad actors.
But a dealer properly armed with the correct information and awareness can effectively stay proactive and protect the dealership.
