Auto Finance News
  • Home
  • News
  • Features
  • Events
    • Auto Finance Summit East
    • Equipment Finance Connect
    • Auto Finance Summit
    • PowerSports Finance Summit
  • Webinar
    • Harnessing AI & Machine Learning to Address Vehicle Affordability Issues
    • Webinar Library
  • Podcast
  • Powersports
  • Big Wheels Data

No products in the cart.

Subscribe
  • Capital & Funding
  • Compliance
  • Risk
  • Technology
  • Best Practices
  • Compliance Monitor
Log In
No Result
View All Result
Auto Finance News
  • Home
  • News
  • Features
  • Events
    • Auto Finance Summit East
    • Equipment Finance Connect
    • Auto Finance Summit
    • PowerSports Finance Summit
  • Webinar
    • Harnessing AI & Machine Learning to Address Vehicle Affordability Issues
    • Webinar Library
  • Podcast
  • Powersports
  • Big Wheels Data
BIG Wheels
Log In
No Result
View All Result
Auto Finance News
No Result
View All Result

Due Diligence Instead of Damage Control: Stopping Auto Lending Fraud Before It Starts

Sagent Lending TechnologiesbySagent Lending Technologies
April 10, 2018
in Risk Management
Reading Time: 4 mins read
0
© Can Stock Photo / andose24

The hard-won lessons of the 2008 financial crisis are more relevant today than ever. While the mortgage industry tightened regulations and lending standards post-crisis, the same cannot be said for the auto lending industry. The volume of auto lending has been steadily growing since 2010, and fraud is unfortunately on the rise, too.

While no lender wants to hear that fraud is a growing threat, the good news is that there are several tools and practices to help combat fraud and shrink the risk in auto lending.

From ‘liar loans’ to synthetic identities

Several factors have made the industry prime for exploitation by fraudsters, but they can be summed up in one word: opportunity.

The exponentially increasing volume of loans, particularly subprime loans, provides more opportunity for fraud. While the whole of the auto lending market is growing, subprime loans are surging. According to Wells Fargo & Co., “In 2009, $2.5 billion of new subprime auto bonds were sold. In 2016, $26 billion were — topping average pre-crisis levels.” Unemployment is low and yet delinquencies are on the rise, suggesting that people are being approved for loans they cannot afford.

“Liar loans” are part of the problem. Liar loans are loans that have been approved without the due diligence of income or employment verification, or they can be loans approved with falsified supporting documents. The end result: a loan is awarded to a borrower who cannot repay it.

The push and pull between security and convenience is another problem. Lenders want to pull in customers, and the online application process is one way they can do it. But with the convenience comes a trade-off in security – for both lenders and borrowers. These types of online-only applications have opened the door to ‘synthetic identities.’

Synthetic identities are a Frankenstein’s monster of sorts. The process involves stealing legitimate personal information, such as a social security number or date of birth, and then using it to build a fraudulent credit history for a person that does not exist. The fraudsters then apply for a loan online. They will make a payment or two, but by the time they default, the car has been sold to another buyer and the “borrowers” are nowhere to be found.

Staying ahead of the curve

The reality is that the way in which many loans are originated is opening the door to more fraudulent activity – and higher risk for servicers. In the case of fraud, the problem might go unnoticed until, after the first or second payments are missed, the financial institution tries to call the borrower and discovers the person doesn’t exist. Or, alternatively, the person at that phone number and with that name is an actual person whose information was stolen to obtain a fraudulent loan.

There are third-party products available to counter the use of synthetic identities throughout the credit decisioning process. They work by monitoring the trending of external along with internal data. For example, if an applicant with the same name, date of birth or social security number is appearing on applications or contracts for auto loans or leases, the lending institution can flag the application to perform additional due diligence.

There are also tools that provide employment and salary verification. These tools can help ward off the use of falsified documentation in loan applications. Third-party scoring tools can discern consumers’ ability/probability to repay a loan. By extension, data mining around the probability of payment or default will determine if a customer will be a good candidate for a loan, protecting both the borrower and the lender.

Predictive modeling organizations are also being brought into the fraud-prevention fold. These types of organizations use data to predict major events in a borrower’s lifetime. They can provide insight into the likelihood a potential customer will miss payments or declare bankruptcy.

From a loan servicing perspective, there are other ways to zero in on fraud, such as performing welcome calls to the newly booked borrowers and lessees on an account. This doesn’t need to be a labor-intensive, costly process. Skillful data mining and the use of scoring tools can help construct meaningful call lists, and business process outsourcing can handle the volume of calls as well as the customer service aspects of the outreach.

In this scenario, once a contract is received and booked, and before the first payment is made, the lender can place a call to the borrower/lessee. The call gives the lender the opportunity to welcome the borrower to the organization and thank him or her for the business. The lender can also use this call to confirm that the application information on file is correct, such as the terms of the loan, the collateral and the borrower’s contact information.

These welcome calls also allow the lender to raise a red flag if the borrower cannot be reached. The lender can then contact the dealer to take swift action to contact the customer and, if necessary, recover the collateral. This chain of communication is important because the hard truth is that the more time has passed, the less likely the lender will be able to collect the collateral.

Given the myriad ways for fraud to seep into your operations, staying ahead of always-evolving technology and trends is essential. Lenders cannot afford to delay in employing every weapon in their growing arsenal to combat fraud. Using the tools and data to make educated lending decisions up front is well worth the price tag, as the costs of cleaning up after a bad lending decision are far greater than that of due diligence.

 

Tags: FiservfraudPayments
Previous Post

TD Auto Expands Floorplan Program as Dealer Inventories Rise

Next Post

Santander Fined by California for Alleged Referral Rate Violations

Related Posts

Risk Management

Used-vehicle floorplan to see uptick ahead of tariffs

May 21, 2025
Bruce Newmark hosting a panel with Robert DeJarnette, VP of Risk Management at Consumer Portfolio Services, Charlie King the Chief Technology Officer at Arivo Acceptance, Eduardo Perez the Chief Customer Officer at Tricolor, and Scot Seagrave the Chief Executive Officer at FinBe USA during Auto Finance East Summit 2025 in Nashville, Tenn.
Risk Management

Subprime lenders see opportunity in recession talks  

May 20, 2025
Inside A Flo Electric Vehicle Charger Assembly Facility
Risk Management

Charging installations drop as Trump ramps up attacks on EVs

May 20, 2025
Next Post

Santander Fined by California for Alleged Referral Rate Violations

Please login to join discussion

Stay Informed with Our Newsletters

PowerSports Finance

The Roadmap Podcast

ABOUT US

HELP CENTER

ADVERTISE

PRIVACY TERMS

ADA COMPLIANCE

CODE OF JOURNALISM ETHICS

Manage Cookie Consent

EXECUTIVES OF THE YEAR

AUTO FINANCE EXCELLENCE AWARDS

MAGAZINE ARCHIVE

INDUSTRY GLOSSARY

facebook linkedin twitter podcast podcast
© 2025 Royal Media
No Result
View All Result
  • Home
  • News
    • All News
    • Capital & Funding
    • EVs
    • Technology
    • Management
    • Powersports Finance News
    • Risk Management
    • Sales & Marketing
  • Events
    • Auto Finance Summit East
    • Equipment Finance Connect
    • Auto Finance Summit
    • PowerSports Finance Summit
  • Features
    • Latest Issue
    • Features
    • New Tracks
    • Car Culture
    • Staffing Shuffles
    • Under The Hood
    • Spotlight
    • Issue Archive
  • Webinar
  • Podcast
  • Big Wheels Data
  • SUBSCRIBE
  • Log In / Account

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Home
  • News
    • All News
    • Capital & Funding
    • EVs
    • Technology
    • Management
    • Powersports Finance News
    • Risk Management
    • Sales & Marketing
  • Events
    • Auto Finance Summit East
    • Equipment Finance Connect
    • Auto Finance Summit
    • PowerSports Finance Summit
  • Features
    • Latest Issue
    • Features
    • New Tracks
    • Car Culture
    • Staffing Shuffles
    • Under The Hood
    • Spotlight
    • Issue Archive
  • Webinar
  • Podcast
  • Big Wheels Data
  • SUBSCRIBE
  • Log In / Account

THIS WEBSITE USES COOKIES

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “I CONSENT”, you consent to the use of ALL the cookies.

Cookie settingsI CONSENT

Review our Cookie Policies
.
Manage Cookie Consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
34f6831605sessionGeneral purpose platform session cookie, used by sites written in JSP. Usually used to maintain an anonymous user session by the server.
a64cedc0bfsessionGeneral purpose platform session cookie, used by sites written in JSP. Usually used to maintain an anonymous user session by the server.
CookieConsentPolicy1 yearUsed to apply end-user cookie consent preferences set by our client-side utility.
cookielawinfo-checkbox-advertisement1 yearSet by the GDPR Cookie Consent plugin, this cookie is used to record the user consent for the cookies in the "Advertisement" category .
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
crmcsrsessionGeneral purpose platform session cookie, used by sites written in JSP. Usually used to maintain an anonymous user session by the server.
JSESSIONIDsessionThe JSESSIONID cookie is used by New Relic to store a session identifier so that New Relic can monitor session counts for an application.
LS_CSRF_TOKENsessionCloudflare sets this cookie to track users’ activities across multiple websites. It expires once the browser is closed.
LSKey-c$CookieConsentPolicy1 yearUsed to apply end-user cookie consent preferences set by our client-side utility.
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
CookieDurationDescription
__cf_bm30 minutesThis cookie, set by Cloudflare, is used to support Cloudflare Bot Management.
_zcsr_tmpsessionZoho sets this cookie for the login function on the website.
663a60c55dsessionThis cookie is related to Zoho (Customer Service) Chatbox
e188bc05fesessionThis cookie is set in relation to Zoho Campaigns
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
CookieDurationDescription
_ga2 yearsThe _ga cookie, installed by Google Analytics, calculates visitor, session and campaign data and also keeps track of site usage for the site's analytics report. The cookie stores information anonymously and assigns a randomly generated number to recognize unique visitors.
_gid1 dayInstalled by Google Analytics, _gid cookie stores information on how visitors use a website, while also creating an analytics report of the website's performance. Some of the data that are collected include the number of visitors, their source, and the pages they visit anonymously.
CONSENT2 yearsYouTube sets this cookie via embedded youtube-videos and registers anonymous statistical data.
vuid2 yearsVimeo installs this cookie to collect tracking information by setting a unique ID to embed videos to the website.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
CookieDurationDescription
__Host-GAPS2 yearsThis cookie allows the website to identify a user and provide enhanced functionality and personalisation.
_dc_gtm_UA-1038974-31 minuteUsed to help identify the visitors by either age, gender, or interests by DoubleClick - Google Tag Manager.
_fbp3 monthsThis cookie is set by Facebook to display advertisements when either on Facebook or on a digital platform powered by Facebook advertising, after visiting the website.
fr3 monthsFacebook sets this cookie to show relevant advertisements to users by tracking user behaviour across the web, on sites that have Facebook pixel or Facebook social plugin.
test_cookie15 minutesThe test_cookie is set by doubleclick.net and is used to determine if the user's browser supports cookies.
VISITOR_INFO1_LIVE5 months 27 daysA cookie set by YouTube to measure bandwidth that determines whether the user gets the new or old player interface.
YSCsessionYSC cookie is set by Youtube and is used to track the views of embedded videos on Youtube pages.
yt-remote-connected-devicesneverYouTube sets this cookie to store the video preferences of the user using embedded YouTube video.
yt-remote-device-idneverYouTube sets this cookie to store the video preferences of the user using embedded YouTube video.
yt.innertube::nextIdneverThis cookie, set by YouTube, registers a unique ID to store data on what videos from YouTube the user has seen.
yt.innertube::requestsneverThis cookie, set by YouTube, registers a unique ID to store data on what videos from YouTube the user has seen.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
CookieDurationDescription
caf_ipaddrsessionNo description available.
citysessionNo description available.
countrysessionNo description available.
gnt_eidsessionNo description available.
gnt_eu6 hoursNo description
iamcsrsessionZoho (Customer Support) sets this cookie and is used for tracking visitors (for performance purposes)
systemsessionNo description available.
traffic_targetsessionNo description available.
Save & Accept
Powered by CookieYes Logo