Record $3.2 B in Synthetic Fraud Losses Hits Lenders, Autos Hardest

A troubling trend for creditors became starkly clear in late 2024 and into 2025: synthetic identity fraud – where fraudsters create fictitious borrowers by combining real and fake personal data – has exploded to all-time highs.

A TransUnion fraud study revealed U.S. lenders lost a record $3.2 billion to synthetic ID fraud in 2024. The auto lending sector was hit hardest, as scammers used fake identities to secure car loans and then disappear with the vehicle. In fact, the proportion of new accounts flagged as potential synthetics jumped 18% year-over-year.

Credit unions, which often pride themselves on member relationships and may have less stringent fraud detection than big banks, found themselves increasingly exposed.

Collections departments encountered baffling cases of “ghost” borrowers – accounts that turned out never to correspond to a real person, making recovery impossible. In other cases, organized rings manipulated credit bureau data (“credit washing”) to boost sham identities’ credit scores, then took out loans and vanished.

The warning for collections managers: tighten verification and collaborate with risk teams to catch fraud at origination. Many credit unions are now beefing up ID verification for online applications, using knowledge-based authentication or third-party fraud scoring tools. They are also training collections staff to recognize red flags (e.g., if contact info is invalid or a borrower claims identity theft after default).

Fortunately, awareness is rising. Law enforcement and industry consortia are targeting synthetic fraud, and improved data analytics can help detect synthetic profiles before loans are funded.

Takeaway: Fraud trends directly impact collections – you can’t collect from a fake person. The 2024 spike in synthetic identity fraud is a call to action for credit unions to bolster fraud defenses on the front end, which in turn protects the loan portfolio from uncollectable losses on the back end.