Crackdown

Seems like regulators are starting to clamp down on fraudulent auto lending activities.

Here’s a look at some recent events:

• April 22: N.Y. Attorney General Eric Schneiderman put the brakes on illegal lending by Master Motors of Buffalo Inc., a dealership that was making loans to consumers without a license. Master Motors agreed to stop the practice and pay $25,000.

• April 14: The Securities and Exchange Commission charged subprime lender Inofin Inc. and three company executives with defrauding investors to the tune of $110 million. Investors allegedly were told the company would use the funds to originate new loans; instead, the money was used to open car dealerships and form real estate property developments, according to a complaint. The SEC also charged two of Inofin’s sales agents with illegally offering to sell company securities without being registered with the SEC as broker-dealers.

• April 12: Seven people were indicted for their roles in an $800,000 auto loan scheme. The South Carolina group fraudulently obtained auto loans by providing false documentation to more than 16 banks and credit unions. They face a maximum of 30 years in jail. The case was investigated by the FBI and is being prosecuted by Assistant U.S. Attorney Nathan Williams.

• March 31: N.Y. AG Schneiderman sued One Source Networking, of Auburn, N.Y., for allegedly forcing car buyers to purchase extended warranties ― for $2,000 to $2,500 ― in order to qualify for their loans. Click here for the audio to Schneiderman’s press conference about the case.

I’m not sure if fraud is becoming more prevalent, or if regulators are just starting to crack down more as the economy recovers. But as originations ramp up, the opportunity for fraud will grow. Now’s the time for lenders to revisit fraud policies and boost training.