Santander Mitigates Impound Fraud Losses in Florida

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Santander Consumer USA has identified and started to mitigate millions of dollars of losses in Florida caused by impound fraud that has gone “unnoticed” in the industry, said Zahid Kassem, senior vice president of enterprise fraud and dealer management.

This type of fraud occurs when an impound lot acquires collateral through bankruptcy or by way of an abandoned car and overcharges the lender for repair work that may never have been completed.

“Impound fraud has probably been around, but many organizations have just written it off as a loss and haven’t really spent time to understand what’s happening,” Kassem told Auto Finance News. “We were able to identify a strategy that puts the onus back on the body shops to prove to us that they did work, and that has mitigated some of our losses.”

The strategy involves putting a bond on the collateral such that the body shop has to falsify the claim before a court if it wants to perpetrate fraud — and that has been effective at deterring the practice for Santander. Kassem stressed the need for fraud teams to collaborate with the servicing teams that pay impound fees to identify the “habitual” offenders. Lenders have to work quickly because they are typically given less than seven days to make a decision or give up the security interest on the lien.

For years, Santander has just paid these body shops because the lender was effectively “held for ransom,” but this new strategy is mitigating the loss, he said. While pre-funding fraud still accounts for the greatest amount of losses, post-funding fraud such as impound fraud, title washing, and payment fraud are rising as well, he detailed at the Auto Finance Performance & Compliance Summit last week.

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As Assistant Editor at Auto Finance News, William specializes in covering compliance, operations, and subprime issues. As a Brooklyn implant by way of Ohio, he's happy to discuss the triumphs and pitfalls of Cleveland sports as well as the latest music trends. Former bylines include Candy & Snack Today, Inverse, and The Tennessean.

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