What you need to know about fraud risk – and why you should care

It goes without saying (almost) that an auto lender such as Santander Consumer USA (SC) would be concerned about the threat from fraud.

Most auto dealers also would agree that it poses a risk to their businesses.

But few would suggest that fraud is as easy to identify and deal with as it is to acknowledge.

So why should you care if your dealership hasn’t had a problem? You’ve heard the old saying that “past performance is no guarantee of future results.” Well …

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“The number of identity theft, fraud and elder-abuse complaints … has increased significantly, resulting in a push at all levels of government to regulate more closely auto lenders and dealers,” says an SC-produced brochure, Driving a New Model | A dealer guide to recognizing the warning signs of fraud, identifying suspicious buyers and taking action to reduce costs.

“Here in the U.S., fraud is on the rise in a big way,” wrote Frank McKenna of PointPredictive consulting firm in a separate Digital Dealer Magazine report 5 Reasons Car Dealers Should Be Concerned with Fraud. “Massive data breaches, like the Equifax breach, have given criminal fraudsters access to more information to defraud consumers and businesses. That is why we can expect more fraud perpetrated and more losses incurred than any other point in history.”

McKenna reported that “fraudulent applications could exceed $6 billion” this year, with one in every 200 applications containing information that could lead to a problem with the loan after funding.

Driving a New Model was produced to help dealers identify and take action against this threat.

“Awareness of fraud and elder-abuse red flags will allow you to take steps to reduce these risks and will result in a number of benefits,” according to the SC pamphlet.

Driving a New Model suggests those benefits could comprise:

  • Improvement in the overall customer experience
  • Reduction in consumer harm and risk to the dealer’s reputation
  • Reduction in credit stipulations on an application
  • Reduction in funding delays to dealership
  • Reduction in post-funding disputes and potential unwinds

Our upcoming series, Driving a New Model, will help dealers spot the red flags for identity fraud, application misrepresentation, straw buyers and elder abuse, and includes actionable checklists.

“Establishing a partnership with lenders is the best way to fight fraud,” wrote McKenna. “Since lenders have more tools to diagnose and detect fraud, they can help you understand the impact to you before it ever happens. Good collaboration on fraud is the key to winning the war on fraud.”

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