In the wake of large natural disasters like Hurricanes Harvey, Irma, and Maria, lenders tend to see an upsurge in credit applications for auto loans. In fact, strategic lenders offer financial relief in the affected areas, offering better rates, 0% APR, alternative payment arrangements, and even payment relief. These efforts help consumers get back on their feet, they help the local economy, and they help lenders capture more auto loan volume. However, no good deed goes unpunished because this relaxing of credit standards has the potential to make it easier for criminals to perpetuate identity fraud.
Think about it for a minute.
Your institution is processing more credit applications for auto loans than it has in the last three months. Your team is stressed and overworked as they try to capture as much business as possible. You’ve temporarily relaxed your standards as consumers with totaled vehicles are trying to trade them in even though they are upside down in their current auto loan. How easy do you think it would be for a person with the Social Security number of a relative, and who knows previous addresses and phone numbers, to slip through the system?
While relaxing your lending standards to help consumers affected by natural disasters is a noble idea that is beneficial for consumers, dealers, and your institution, it’s also important to stay vigilant on your compliance procedures. Do your due diligence:
- Provide additional fraud detection training for your loan officers.
- Work with your technology provider to implement additional stipulations and/or identity verification questions for all loan applications.
- Ensure any updates to your procedures are documented.
- Make sure all indirect consumer loans are standardized.
- Monitor and document all training, forms and compliance efforts.
Of course, there’s only so much you can do to detect and prevent identity theft when consumers apply for credit through a dealership. That’s why it’s so important to develop strong dealership relationships. Remember, dealers are facing the same issues when it comes to preventing fraud. And, they are just as motivated to work with you to enhance their identity theft prevention process.
Here’s the good news: The post-disaster car-buying surge normally has a lag time as consumers wait to get their insurance payouts. This gives dealers and lenders the opportunity to train their staff on how to be on the lookout for fraudulent behavior and to reinforce their compliance procedures.
Schedule a time to meet with your dealers to review both your lending relief efforts and any additional stipulations you may require to extend credit. Offer to review the dealership’s compliance procedures for identifying red flags. Remember, dealers only have their own experience to go from when developing procedures. You have the experience of every dealership you’ve ever worked with at your disposal. You have a better vantage point to inform dealers where there might be a hole in their procedures.
Compliance processes aren’t required just to make your life more difficult. They are meant to protect consumers and your business from fraud. In addition, compliance can mean higher customer satisfaction for you and your dealer partners, resulting in repeat business for the dealer and increased loan volume for you.
With more than 40 years in innovating and implementing proven go-to-market strategies in the dealership space, EFG Companies understands the balance between ensuring complete compliance and retaining and building profit margins. That balance lies in the value proposition.
To dealerships, a lender’s value proposition lies in their funding process. The amount you are willing to fund determines how much profit a dealer can make on a single sale. Meanwhile, consumers are simply concerned with getting the most value out of the vehicle they are purchasing. It is possible to enhance your value proposition with both audiences and manage risk with consumer protection products.
Offering products like a vehicle service contract or vehicle return on your loans helps dealers increase their profit margins through the sale of upgrades. They help consumers preserve their vehicle’s value and stay current on their payments, and therefore they have the potential to give lenders total control over compliance of the actual product sale while also reducing risk.
EFG structures its products and services to not only provide value to you, but also dealerships and the end-consumer. Our unmatched client-engagement model goes well beyond simple product innovation to mitigating liability through superior claims processes, and continuous training and auditing practices. Contact us today to find out how we can take you to another level of compliant profitability.Like This Post