Data & Analytics
2 minute read
Jun 12, 2018
Written by: Shawn Sweeney
The Spinnaker Consulting Group team of experts joined auto finance leaders and dealer principals from around the country last week for the 22nd Annual Non-Prime Auto Financing Conference, featuring a deep dive into the key industry issue of auto finance fraud. The National Automotive Finance Association’s annual event creates the opportunity to learn about the challenges of non-prime financing including fraud, regulatory compliance, risk management, and more.
Spinnaker Directors Joel Kennedy and Jeff Marshall were Spinnaker’s boots on the ground, talking shop in our booth as well as discussing trends and challenges during the sessions and throughout the conference. Joel Kennedy, who is also on the NAF Association’s Board of Directors, further contributed his industry expertise as a session presenter and moderator to kick off Fraud Friday, an entire morning of discussions devoted to auto finance fraud.
If you were unable to attend, here are a few highlights related to auto finance fraud:
- Auto finance fraud continues to be a major focus and challenge for the industry. In fact, incidents of auto finance fraud are up 20 percent year over year and are costing our industry an estimated $6 billion a year.
- Income and employment fraud are still the biggest sources of fraud and represent 47 percent of all observed fraud.
- Dealer risk – or fraud introduced by dealers – represents 25 percent of all observed fraud.
- According to TransUnion, synthetic ID fraud exceeded $500MM last year, but does not represent a major source of fraud for non-prime lenders.
- Industry peers must work together. The industry’s ability to fight fraud will be greatly enhanced when lenders are willing to share best practices and information without sharing critical, proprietary information.
- Lenders can proactively protect themselves by completing comprehensive risk assessments. Completing a risk assessment is not difficult, and there are many experts who can help you complete the assessment as needed. A good risk assessment ensures lenders are operating with “eyes wide open.”
- Leveraging the right tools can help. Point Predictive has initiated a fraud consortium scoring model, utilizing a data set of 55 million applications submitted from non-prime lenders that has a 50 percent detection rate in identifying fraud and misrepresentation related to the riskiest 10 percent of loan applications.
If you want to learn more about these takeaways or you’re interested in a detailed recap from Fraud Friday, just let us know. We also invite you to check out Joel’s article “The Taxonomy of Fraud in Indirect Auto” on page 8 of the new May/June 2018 issue of Non-Prime Times.
Recently, I was invited to participate in Forbes Magazine’s Finance Council, which is a collection of senior-level financial services executives from across the country who’ve been tapped to share advice and resources. Last month, the editorial board asked council members for strategies to identify critical business metrics – and they appreciated the Spinnaker perspective on measurement, and the need to evolve reporting as business goals change. The crux of our recommendation: select metrics that drive decision making and for every metric you add, attempt to eliminate an old one.
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