U.K. Vehicle-Finance Fraud Incidents Down 6% in Q2

Vehicle-finance fraud in the U.K. fell 6% in the second quarter to 184 cases, with 743 incidents reported by lenders over the previous 12 months.

The Finance & Leasing Assn. says its members and their dealer partners prevented at least 1,760 cases of attempted fraud at the application stage during the quarter, helping avoid losses of more than £23.8 million ($37.8 million).

The association says first-party fraud, including fronting, was the most common type of motor-finance fraud during the 3-month period.

First-party motor-finance fraud usually occurs when a person takes out credit on behalf of someone else. A finance agreement is fronted when a vehicle is not being used by the customer originally approved by the finance company.

First-party fraud accounted for 37% of all car-finance frauds reported to the FLA in the quarter, while application fraud accounted for 30%. Conversion fraud, defined as selling a car when it is still on finance, accounted for 25% of cases. The remaining 8% of cases were identification or impersonation frauds.

Paul Harrison, FLA head of motor finance, says it’s important that finance companies know who is driving their property for the duration of an agreement.

“This does not mean that a parent can’t apply for credit to buy a car for their children, because the location of car will be known,” he says in a statement. “Lenders are more concerned about customers handing cars to third parties who cannot be traced.

“A finance company will usually remain the owner of car until the final repayment is made, and any breach of contract could result in a case being referred to the police’s national Vehicle Fraud Unit for investigation.”