An interesting article on how Credit Union’s are Ferreting Out Auto Lending Fraud was written by Michael Bartlett. It’s a good article and has practical advice about how 6 different Credit Unions address the problem of auto lending fraud.
Credit Union’s are often the target of sophisticated fraudsters because they will often provide more options for their customers than bigger banks when it comes to working with independent car dealers. Also, many Credit Unions may rely on known manual based approaches or policies to control fraud and fraudsters can often pick apart those policies and expose weaknesses
A case in point is this multi-million dollar fraud ring that hit credit unions several years ago- Anatomy of An Auto Lending Fraud.
What 6 Different Credit Union’s Do
#2 – RiverMark Credit Union – Maintain good relationships with dealers and use Fraud Experts to find the fraud.
The Rivermark Credit Union tries to maintain close relationships with dealers and dealer reps. They believe that large volume increases from a single dealer is a big red flag and they will scrutinize those applications when they see this happen.
They also use something called Welcome Calls where they will call the borrower up and verify income on the application itself such as the income.
#3 – Trinity Credit Union – They spot check applications to look for income, employment and straw borrower fraud
The Trinity Credit Union experienced a fraud outbreak that hit 30-40 loans where the dealer was submitting fraudulent pay stubs across all of the applications. When they noticed the trend and became aware of the fraud, and they started to put in place many more fraud checks. Mostly they will let experts spot check the auto loans and look for patterns of income, employment, and even straw borrower fraud.
#4 – Wheat State Credit Union – Work with Only Established Dealers and Verify All Details with Borrower
Wheat State Credit Union is small but they will only work with established dealers and they always verify information with every borrower
#5 – Credit Union of America- Welcome Calls, Identity Checks, Dealer Relationships and Early Pay Default Reviews
The Credit Union of America uses a multi-pronged strategy to review for all types of fraud; checking social security numbers, alerts from the Bureau, maintaining close relationships with their dealers and performing welcome calls with their customers.
#6 – My Credit Union – Verify Collateral, Borrower and Due Diligence on the Application
My Credit Union had a dealer fraud recently and they learned first hand that fraud at the dealer is not isolated to a single loan. The dealer was changing details on the car that was being used as collateral which was discovered through a search of the KBB. Now the Credit Union does detailed reviews of the collateral, the employment and all of the “small things” that might make a difference in determining fraud.
Check out the article by Michael Bartlett, it offers some helpful tips to Credit Unions looking to fight auto lending fraud.