Car Loan Scam Racks Up $1.7 Million in Fraudulent Loans

Inside Subprime: October 4, 2019

By Jessica Easto

A new car loan scam had even the experts fooled. The scheme involved a group of seven scammers that filed paperwork for car loans—for vehicles that didn’t exist. They attempted to obtain more than 80 loans from banks for a total of $2.7 million. They got away with about $1.7 million before they were caught, according to U.S. Attorney’s Office for the Northern District of Georgia.

The scammers created shell corporations by incorporating businesses that sounded like car dealerships with legitimate-sounding names. In reality, they were not licensed to be car dealerships and didn’t even have employees.

Then the scammers had people apply for loans through banks and credit unions, just like a car dealership might do for their clients. The loan applications were in the names of the so-called purchasers and the scammers even supplied fake purchase orders,  documents a bank needs to evaluate a loan.

When the loan went through, the scammers held the money in the name of one of the shell corporations, then split the money among themselves.

“These defendants’ ‘creative financing’ company specialized in ‘auto loan conversions,’ which was simply fraud,” said US Attorney Byung J. “BJay” Pak. “This scam was designed to trick lenders, which in this case were mostly credit unions, into granting loans for sham car sales.”

The scheme was investigated by the FBI and US Postal Inspection Service for about four years. Six people have been sentenced. Two will serve home detention and other will serve time in prison. All will be required to pay restitution. The seventh scammer is in the United Kingdom awaiting extradition.

“Bank fraud is not a victimless crime and these defendants will now have time to reflect on their choice to obtain these fraudulent auto loans,” said Chris Hacker, special agent in charge of FBI Atlanta. “The FBI treats these types of financial crimes very seriously and warns anyone considering this type of criminal activity to also consider the fate of these defendants face as a deterrent.”

Learn more about payday loans, scams, and cash advances by checking out our city and state financial guides, including Chicago, Illinois, Florida, and Texas.