Fraud is more rampant in automotive loans than for other lending segments, according to newly published research.

The TransUnion study examined loans originated between March and September 2023, finding the average fraud loss two years later of nearly $20,000 to be 21 times greater than loss connected to credit cards and six times more than for unsecured personal loan fraud losses. 

The dramatic divide came despite incidence rates lagging those of credit card accounts and UPLs.

Surprisingly, the charge-off percentage for auto fraud losses was highest in credit tiers generally seen as lower risk, the consumer credit reporting agency said, determining those consumers more likely to be synthetic identities. But losses exceeded those of other loan categories across all tiers. 

Reasons for the high fraud losses in auto loans include their typically larger dollar figures, along with “evolving tactics used by suspected fraudsters to exploit vulnerabilities in the lending process,” TransUnion said.

Synthetic fraud continues to factor heavily in loan fraud cases, but the emerging category of credit washing is gaining steam as another way to hide risk, the agency said. In credit washing, consumers dispute data, such as delinquent or charged-off accounts, to temporarily raise their credit profiles, including claiming identity theft, TransUnion explained. 

“These consumers may appear highly creditworthy at origination, but their subsequent performance data tells a different story—one that poses significant risk to lenders relying solely on traditional scoring methods,” TransUnion said of credit washers.

The research points to the need for greater, more sophisticated protections, according to the report.

“To stay ahead, lenders must integrate fraud-specific attributes and verification tools that can detect these anomalies before they impact portfolio performance,” said Satyan Merchant, TransUnion’s auto and mortgage business leader.

“As the auto lending landscape becomes more digital and interconnected, the risk of fraud is no longer isolated to fringe cases—it’s becoming a systemic challenge that requires proactive, data-driven and innovative solutions.”

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