Breaking persistent motor finance fraud trends with data syndication

In 2022, Cifas reported a 13% year-on-year increase in motor finance fraud cases likely instigated by the worsening cost-of-living crisis. As a result, the race is on for motor finance providers to better mitigate fraud losses while maintaining a streamlined customer application experience.

Although a difficult balancing act, motor financers can succeed with the right tools – data being amongst the most powerful. But what data do you need and how can it be utilised?

Here, Synectics Solutions answers the question by analysing four trends driving motor finance fraud and how data can be best leveraged to lessen harm to company and consumer.

• Motor Finance Fraud Trend 1: Application Fraud [Skip ahead]
• Motor Finance Fraud Trend 2: Identity Fraud [Skip ahead]
• Motor Finance Fraud Trend 3: GAP Insurance Fraud [Skip ahead]
• Motor Finance Fraud Trend 4: Sub-hiring [Skip ahead]
• How to keep on top of motor finance fraud trends with data [Skip ahead]
• An example of counter-fraud data in action [Skip ahead]
• How our motor finance customer maximise National SIRA [Skip ahead]

Motor Finance Fraud Trend 1: Application Fraud

Acute pressure on household budgets means that more consumers are struggling to pay their car finance – even those who had previously been financially stable. As a result, falsified wage slips or bank statements are being used to artificially inflate earnings and secure vehicle finance.

The temptation to commit fraud is compounded by a desensitised application process. Today, many applications are completed from mobiles with a few taps - weakening the psychological barrier. It is no longer hardened fraudsters providing misleading information. In fact, there has been a 16% increase in false application fraud associated with previously law-abiding consumers.

Motor financers are less likely to suspect uncommon perpetrators of fraud. That can result in fraud being detected late, when chasing missed payments or ultimately recovering vehicles obtained using false information is very difficult.

Motor Finance Fraud Trend 2: Identity Fraud

Identity fraud has risen by 43% compared to 2021 – including but not limited to identify document falsification and the misuse of genuine articles.

As some providers limit identity checks to encourage a frictionless customer experience, it has become common for criminals to create false profiles using genuine documents unlikely to be flagged during a low-level check. If a fraudster slips the net once using this technique, evidence suggests that they are more likely to make multiple vehicle finance applications across different lenders.

Read more about how NaVCIS is combatting this type of fraud here.

Motor Finance Fraud Trend 3: GAP Insurance Fraud

Many motor finance providers also offer GAP insurance, which remains popular amongst finance customers. In recent months though, the product has been heavily exploited for fraud.

Criminal activity involving staged theft, arson or significant damage arising from (potentially staged) accidents is spiking. This is likely connected to consumers who want to clear their now unaffordable finance or balloon payments – ironically, often caused by their deliberate misrepresentation of mileages etc at application stage.

The threat exponentially increases for finance providers of course. If the customer does deliberately destroy the vehicle and the motor insurer identifies the fraud, then neither the motor RTA not the GAP policy will pay out. Recovery actions can then become very difficult indeed.

Motor Finance Fraud Trend 4: Sub-hiring

Sub-hiring – a typically less-nefarious but still damaging scheme – is rising as struggling consumers seek out secondary income.

If tied to a financed vehicle, the consumer is, of course, contractually unable to sell and will be detected rapidly. One alternative is sub-hiring, which with the recent growth of vehicle sharing platforms such as Turo and Hiyacar, has become all too appealing.

How To Keep On Top Of Fraud Trends With Data

Understanding trends and how the processes behind them are evolving is critical to mitigating the constant risk of motor finance fraud. But, perhaps most important is the data – having access and knowing how to draw on and verify against it.

For example, the simple provision of the financed vehicle Make, Model, Registration and Vehicle Identity Number details easily enables the proactive monitoring of that asset and potentially fraudulent activity relating to the same.

This is why Synectics Solutions continually evaluates new ways to the pool of data held in National SIRA – the UK’s largest syndicated database of cross-sector customer risk intelligence, owned and operated by Synectics Solutions.

An Example Of Counter-Fraud Data In Action

In 2022 Synectics Solutions partnered with the National Vehicle Crime Intelligence Service (NaVCIS) to make intelligence alerts accessible to SIRA users in banking, insurance and motor finance. Uniquely, Synectics SIU provides a two-way intelligence sharing process by furnishing NaVCIS with additional information on every intelligence alert subject they issue which has already resulted in police action and arrests.

In a recent case NaVCIS intelligence included a fraudster mobile phone number and details of a genuine driving obtained using false information.

Synectics SIU identified an unsecured loan application made to a high street bank using the same details just one day later. The solutions stopped the loan facility being provided and in addition, connected the fraudulent phone number to a network of thirteen individuals and sixty applications. This intelligence is simply not available elsewhere.

A fraud detection solution performs best when fed with the highest quality and quantity of data possible – syndicated across relevant sectors and verticals. For example, motor finance organisations can benefit from the insight of their insurance and claims counterparts.

This is why Synectics Solutions actively encourages motor sector members to submit as many data items per enquiry without additional charge and to rescreen those enquires every time a material change occurs or at a predefined time frame (e.g. every 6 months).

Items include unstructured data such as images of wage slips, utilities bills and driving licenses, all of which enhance the fraud detection capabilities of motor finance organisations.

For example, submitting all contact details, loan amount, deposit and expected balloon payment data alongside make and model, VRN and VIN enables motor finance providers to build a detailed picture from which risk can be interrogated and decisions made. The result is accurate, real-time checks with great service prioritised for honest customers.

Do you want to break persistent fraud trends and use data more intelligently? Get in touch with Synectics Solutions for more ideas and insight at info@synectics-solutions.com.