An InformedIQ study based on a survey of more than 2,500 auto finance professionals finds the majority live in fear of “data hallucinations” as the burden of fraud grows.

Nearly two-thirds of respondents say incidents of fraud increased by 5% to 25% over the past year, with 52% ranking data hallucinations — defined as “plausible but incorrect” AI-generated data — as their No. 1 concern. Many are investing in AI-powered credit risk modeling (43%) and fraud detection and prevention (24%) tools to counter the risk.

“Lenders are no longer looking for futuristic promises; they are seeking immediate, tangible solutions to an escalating fraud crisis,” writes Jessica Gonzalez, an InformedIQ vice president and general manager, in a release. “The data show a clear disconnect: fraud is becoming more sophisticated — powered by generative AI — yet the majority of the industry is still relying on manual reviews that are slow, costly and prone to error.”

A recent Upstream report blames increasingly sophisticated criminals using generative AI and large language models for a spike in ransomware attacks.