Weekly Wrap: 2021 origination growth and rising fraud

The first half of 2021 is projected to see increased auto originations as the world prepares for the launch of the COVID-19 vaccine as well as car sales driven by pent-up demand and improved inventory. Still, auto lenders must also prepare for a rise in fraud related to originations. Of growing concern is synthetic fraud, in which an identity is created with a consumer’s real name and birthdate tied to a false Social Security number. In this edition of the Weekly Wrap, Amanda Harris and JJ Hornblass discuss these developments and news to come later in the week. .embed-container { position: relative; padding-bottom: 56.25%; height: 0; overflow: hidden; max-width: 100%; } .embed-container iframe, .embed-container object, .embed-container embed { position: absolute; top: 0; left: 0; width: 100%; height: 100%; } Video Transcript: Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain . JJ Hornblass 00:01 Hi, everyone. I'm JJ Hornblass and welcome to the roadmap from auto finance news since 1996, the nation's leading newsletter on automotive lending and leasing. This is our weekly wrap for what's happening in auto finance. Today is December 14 2020. Before I begin a thanks to auto finance news, advertisers defy solutions FiOS and CCC Information Services for their continuing support. Thank you to them. And I am happy to be joined by Amanda Harris, Associate Editor of auto finance news. Hi, Amanda. Welcome. Today the first COVID vaccines dose of vaccine doses were given to patients in the United States and even while the US death toll approaches 300,000. Yeah, the electoral college voting is underway as we record this podcast, nearly certain to ratify Joe Biden as the next president of the United States. Also in the news services from Google experienced widespread outages around the world this morning preventing people from accessing Gmail, YouTube and other Google products. It has subsequent the outage has subsequently been resolved. new vehicle sales in China advanced 11% in November, new data shows and finally, the Cleveland Indians will drop the baseball team's longtime name, which has been the subject of protest by fans and Native American groups who criticized it as racist. We are not going to weigh in on an alternative name, Amanda. But we will discuss strong originations that are expected for the first quarter and the second quarter of 2021. So the early part of the year is expected to turn in strong originations performance, the top line number, Amanda was auto originations up 8% or forecasted to be up I should say, 8%, year over year, in the first quarter of 2021. So maybe give us some additional background on origination expectations for earlier in the for early next year. What might be driving those expectations? And maybe we'll talk about perhaps some some factors that may come up and and change those, those final results. Yeah,Amanda Harris 03:06 so there's obviously a couple factors in play. I think part of it was consumers, you know, kind of maybe held off on on buying cars. Of course, when dealerships were set down in March and April, they really couldn't, as we've kind of talked about a couple times, that pent up demand is still, you know, they're still kind of riding on that a little bit worse, of course, with people wanting certain models and the newer models, those kind of things kind of factor into with that increase in the first part of next year. Some of that will obviously be people who waited, you know, to get cars because they wanted the newer models to come out. Some of them may have just been waiting to see how things are gonna play out with work from home what their situation is. But it sounds like overall, the industry does think that things will kind of continue this trajectory of recovery that has already, you know, kind of started we're already seeing, you know, certain lenders chase auto four, one Capital One ally financial, in the third quarter already kind of started seeing this trend happen where they saw increased originations. And so that's kind of expected to continue into early 2021, especially now that vaccines are becoming available, there's not really a lot of speculation that they'll be any more kind of wide shut downs, anything like we saw back in spring, all that kind of drives the expectation that things will kind of get back to normal and continue that in the next couple months.JJ Hornblass 04:30 So the forecast from TransUnion. This is a TransUnion forecast has originations up year over year in the first quarter 8% and in the second quarter 14.6%. So I think what you're saying is, there are very clear reasons why originations will grow. In let's just we're just focusing on the first First half of 2020. But those percentage increases seem pretty significant. And you know, is this just a function of are those numbers so eye popping, because things got so bad in the second quarter of 2020? Because of the pandemic? And really these are kind of nominal numbers when you take it historically? Or are we really to be, you know, wowed by the numbers that are being projected by TransUnion? Yeah, soAmanda Harris 05:34 everything I've been hearing, you know, from all of our sources, and all of our reporting is really more talking about getting back to normal versus saying that things are going to be at levels we haven't seen. So of course, when you're comparing year over year, this time last year may not have been, we're obviously not coming out of a huge shutdown, like we are this year. So obviously, there's going to be a little bit of that playing into those numbers as well, if you were shut down, you couldn't really do anything. And then all of a sudden, you could do everything, of course, you're going to see a big jump. And so I'm sure that's part of it. And I think, again, part of it is just people have weighed and I think they're expecting some of that pent up demand to kind of show up in that first part 21 as well, that we're kind of already started to see, but a lot of it's just that we're recovering out of a really crazy situation, that's pretty unprecedented. So you're gonna, of course, see bigger jumps, because you're coming from a larger drop than normal. So I think you can't ignore that as well. JJ Hornblass 06:31 Do you get a sense for even for this guy know that that third quarter was just, you know, surprisingly strong for certain lenders? Not every lender, but for certain lenders? I mean, are you getting a sense for that? For for that there's strong performance in the fours in this current quarter in the fourth quarter as well? Amanda Harris 06:55 Yeah, I think it's kind of continued from the third quarter, Chris, we haven't seen everything come in yet. But from what I'm hearing, everyone's still kind of seeing things normalize or seeing originations go up, you know, they're seeing car sales inventory is coming back. It's not, it's still not quite where it needs to be. So that's still a concern going into early 2021, which is actually something I'm looking into this week, a little bit. So inventory is still you know, definitely a concern for sales. But overall, everyone kind of seems to be on this kind of I use the term kind of loosely but cautious optimism side of things, where they do think that things will continue rebounding, rather than kind of falling back down. Like we saw back in the spring, JJ Hornblass 07:40 when we add we when we were when inventories were at their Nadir didn't think we would use that word in the podcast for whatever. When they were at their Nadir. We said that I if I'm correct me if I'm wrong, I believe we said we thought that inventories would would really normalize in the first quarter of 2021. Is that still the current expectation? Because I know there has been some improvement in recent weeks. But you know, kind of, you know, do you think that this will? Is there a sense that that that timing is still on point? Or is it you know, later or even earlier? Yeah, I Amanda Harris 08:25 think it's still pretty on point. Everything I've seen has has that timeline there early, first, a second quarter of 2021, where pretty much everything will look a little more normal when it comes to inventory, leasing vehicle sales, that's kind of the time on everyone's stuck on is the first especially the second quarter 21. I don't think everyone really expects things to be back to complete normal, pre COVID levels in that first one, I think it's more just things are going to start being closer and then by the second, or is when we'll kind of have a little bit more normal numbers compared to pre COVID situation. So that's kind of the thought process is by then things will look a little bit more as they normally would, and had we not gone through a painting. JJ Hornblass 09:09 So and when you talk about originations, you've got to talk about the fraud that comes with it in some cases, unfortunately, and there seems to be growing synthetic identity fraud for credit unions that originate auto loans. It was interesting to note, I mean, you mentioned this in your article, but 36% of total credit union outstandings are auto outstanding. So this is a big portion of credit union balance sheets. And the synthetic identity fraud has been growing. delay the data that the latest date is that one in seven auto loans at credit unions have some degree of synthetic auto fraud. Is this as is it is, you know why? Why is this? Why is this happening? Is it just related to the recession? Or do credit unions need more substantial risk controls to prevent such fraudulent incidence? Amanda Harris 10:38 Right. So there's a couple of factors that play into why this is kind of becoming more and more of a problem one, it's, it's just being more looked at. So you know, synthetic fraud has been around, I think, about 15 years that they've known it exists. But it's becoming more of a problem one, because credit unions are doing more indirect lending. So that kind of opens the door for more of this. And then to, you know, as we go to more digital type of online car buying and things like that, that just makes it a little easier for these false identities to kind of get through, because they're not requiring a person to walk into, you know, a dealership credit union office bank gave her that and try to pass off a different social security number than is their own. Because a lot of this is happening with someone who uses their real name, their real date of birth, but then they use a false social security number, either a made up one or one that belongs to another person. So with digital, I think that's part of why we're seeing this become such a bigger concern, because it is happening more often. And the are pretty tech savvy. And so as the credit union step up in the digital world, so do fraudsters, as they always kind of follow what, what is happening and what's available to them. So I think there's a couple factors of why this is more of a concern? JJ Hornblass 11:56 Or do you get a sense for what credit unions are doing to try to stop this particular type of fraud? Amanda Harris 12:05 Yeah, so there is kind of a couple of different areas, the biggest thing that I saw when talking to these credit unions and kind of the one of the challenges and maybe the sticking point, and something that they have to kind of consider if it's the best way of doing things, is they still have a very manual process for kind of reviewing these applications and trying to weed out, you know, who might be a false identity. So they have to send off a form, you know, to let the Social Security ministration, review their social security number, or try to match it up with the actual name and date of birth, well, that takes time. And you have to then rely on the consumer sending that form in. And so of course, there is a part there where you can lose potential, you know, fraudsters, but you can also lose potential good customers, because they don't want to go do that process, right, they're like, well, I don't want to, I want to go somewhere else for my auto loan. So there's a little bit of a challenge, there is still very much manual, it takes time, there's, you know, the risk attention with potential good consumers, you could be losing business. I think that's, that's but that's still a lot of what they do is they send out that form, and kind of do the manual route, there are some technologies that are being used, you know, things like platforms that can kind of match up a person with an ID and like, run it through all these databases and try to match it up with an actual like selfie of the person with the picture on the ID. But it is difficult, because you know, it's hard, you can't really use a driver's license, because people can fake driver's license, and it doesn't list the social security number. And like I said, most of these cases, they're real people, they're just using a made up social security number. So that's a loss, also a lot harder to recognize, because their driver's license is their driver's license, and their date of birth is their date of birth. But if you can't match the social security number, and you don't have the tools in place to really figure that out, that's what makes it so much harder. JJ Hornblass 13:58 Striking that this synthetic fraud costs banks approximately $3 billion a year just just striking to hear so you know, obviously a story we should be following especially as the year turns and and and unemployment continues to take hold on certain portions of the of the market. Amanda what's Uh, what's on slate for next week for us and I'm assuming that x includes a vaccine shop for you right next week. But what what are we reporting on next week? Amanda Harris 14:41 Yes, the vaccines are available yet to people like me who are not quite essential and out there in the frontlines just yet, but that's okay. So this week I'm looking into you're coming up next week, looking into some dealer sentiment changes in especially in you know, recent months. Especially with a pandemic and everything, just trying to see how that really affected our dealers, you know, looking at some analysis of that, and what that means for the industry going forward and kind of where dealers stand. So that's one area that I am looking at. And a part of that will obviously be where inventory stands and some of the things going into next year, I'm also looking at some floor plan for plan financing kind of trends. There's a new player and for plan financing, trying to see you know what that says about that part of the industry overall, kind of where that stands. So a couple different kind of industry trends. Thanks for this week. JJ Hornblass 15:40 I thank you so much, Amanda. And and thank you all so much for listening to us this week on the roadmap. We hope you'll join us next time and check us out at auto finance news dotnet and on Twitter and LinkedIn. And we will see you next time. Thanks, everybody.

Weekly Wrap: 2021 origination growth and rising fraud

Post-COVID economic trends in auto finance

Visionary lending execs must embrace new technologies

Related Posts

Tricolor Auto Acceptance launches AI-powered software service

Credit Unions eye growth after flat 2020

Watch: What will it take to prop up subprime auto originations?

Visionary lending execs must embrace new technologies

INNOVATION & TECHNOLOGY

Digital lending lags despite consumer expectations

Auto Finance Innovation Summit pre-conference survey now open

CORONAVIRUS

CPS sees decline in Q4 originations amid low-interest competition

Subprime sinks in Q3, auto originations move closer to pre-pandemic levels

SPONSORED

Collateral Protection Insurance (CPI): What is CPI and what does it do?

Driving Customer Loyalty, Retention After Total Loss

When tough times hit, proactive strategies pay

About

Contact Us

Follow Us

Weekly Wrap: 2021 origination growth and rising fraud

Already subscribed? Log in below.

Post-COVID economic trends in auto finance

Visionary lending execs must embrace new technologies

Related Posts

By subscribing you agree to our Terms of Use and Privacy Policy

CORONAVIRUS

SPONSORED

About

Contact Us

Follow Us