Identity fraud has been the #1 consumer crime in America for more than a decade, and increasingly it’s hitting car dealerships too.

Combine that with the growth in cyber threats to dealerships, all those threats being accelerated by AI, and the new FTC Safeguards rules, and security has never been more challenging.

According to one recent study, car dealerships in the US lost more than $600 million to identity fraud just in 2022, with a separate study showing a staggering $7.2 billion in total fraud losses at dealerships.

Few dealerships have avoided the sting of identity fraud:

• Nearly 90% of dealerships have seen an increase in identity fraud since the pandemic.
• More than 80% have directly experienced identity fraud at their dealership.
• More than 60% of those dealers have reported a loss of three or more vehicles.

Adding to that pain, there’s growing concern that insurers could increasingly cite a lack of adequate controls and training, or vague or confusing language in the policy, to deny coverage for losses.

In October 2023 a Louisiana Federal Court found that an insurance company providing cyber insurance coverage for vehicles was not liable to cover losses for vehicles purchased online using fake or stolen identities.

ACCELERATING LOSSES

• An identity thief operating in Houston stole 19 vehicles from 15 dealerships totaling $1.3 million. Half of the vehicles were never recovered. That same thief was also believed to have stolen more than 30 vehicles in another state.
• An identity theft ring in Massachusetts stole nearly 50 vehicles worth more than $2 million using fake identities.
• A women was charged with using fake identities to purchase three cars in three days, with a value of more than $130,000, while on bail for five previous cases.
• The two-person vehicle fraud unit of the Houston Police Department reported nearly $9 million in identity theft fraud losses just at their local dealerships in 2022.

According to a recent study from credit bureau TransUnion, the potential lender liability from synthetic fraud in auto loans was $1.8 billion for the first half of 2023.

But there is good news. You already have the best security in place, and already on your payroll. Your employees.