Chief fraud strategist Frank McKenna described the fourth gathering of the PointPredictive Fraud Consortium Roundtable earlier this month just ahead of the National Automotive Finance Association’s Non-Prime Auto Finance Conference as the best one yet.
Besides more than 50 attendees from 21 auto finance companies — including five of the top 10 market leaders — McKenna shared with SubPrime Auto Finance News why the industry is uniting to combat a growing problem.
“It was so much more interactive,” McKenna said in a phone interview following the gathering in Plano, Texas. “When we started the consortium meetings, people were a little shy or maybe didn’t know a lot about fraud, but they were interested. They were less able to share best practices and experiences.
“But at this meeting, there was a lot of collaboration,” he continued. “Everyone was talking, everyone was interacting, trying to figure out what the other lenders were doing to stop fraud and what fraud trends they were seeing. It’s been remarkable to see the transformation of the industry. As soon as they start getting together, they realize the value of working together. The mood was really energetic and participatory.
McKenna and PointPredictive partners including defi SOLUTIONS and Digital Matrix Systems discussed rising fraud trends and potential collaboration on how to best address those issues from an industry perspective.
During the roundtable sessions, finance companies identified their three biggest fraud concerns for 2019. McKenna shared that attendees could use their smartphone to participate in surveys that generated immediate results.
Finance companies in attendance identified their first concern as the dramatic increase in deceptive credit washing where individuals overwhelm creditors with false claims of identity theft to remove legitimate trade lines from their credit. Their second biggest concern is the dramatic rise in synthetic identity which is largely driven by individuals using credit protection numbers (CPNs) to create new credit files under false pretenses. Their third biggest concern is the ongoing and systematic fraud by dealers that results in higher levels of first and early payment default.
The event also included guest speakers, including Sgt. Darren Schlosser from the Houston Vehicle Fraud Task Force and Matt Pannell, former special agent with the Social Security Administration, who shared insights into the growth of synthetic identity fraud and credit repair fraud that are sweeping the nation.
“Synthetic identity is being driven largely by unscrupulous credit repair companies that are convincing ordinary people to commit criminal acts,” Schlosser said. “Using so-called CPNs to apply for credit under false pretenses is a crime and I’m seeing an alarming increase in the number of vehicle financing fraud cases where this is occurring.
“I believe collaboration between lenders, law enforcement, car dealerships and others is important in preventing this type of fraud from growing,” he continued.
At the roundtable, McKenna also provided insight into fraud trends by presenting results from analysis conducted on more than 70 million historical auto loan applications.
The analysis showed that auto lending fraud risk has risen by at least 38% in the past seven years and that fraud origination risk is expected to reach $7 billion in 2019. The analysis further showed a dramatic 140% increase in synthetic identity risk patterns in auto applications since 2016.
McKenna’s research demonstrated that the drivers behind the rising levels of fraud risk were the growth in sharing of fraud methods on social media, the increase in financing to borrowers with lower credit ratings and the billions invested in fraud controls by other industries which have had the effect of pushing fraudsters toward auto finance companies and dealers.
“We appreciate the collaboration that PointPredictive enables through their consortium in addressing our key fraud pain points at these roundtables,” said Jorge Arenado, associate vice president of originations at Westlake Financial. “Their focus on both first- and third-party fraud, and not just identity theft, helps the auto lending industry target all the fraud we experience including income misrepresentation, dealer fraud, straw borrower and fraud ring activity.
“The chance to discuss all of these issues with our peers is a big benefit in helping us shape our future fraud strategies,” Arenado continued.
Mickey Watts is senior vice president at Anderson Brothers Bank and a board member of the NAF Association, which also included a special Fraud Friday segment again this year at its annual conference.
“We learn quite a bit from the PointPredictive roundtable each year,” Watts said. “As fraud continues to morph and change, we are able to meet and discuss the changing fraud patterns with other lenders and discuss best practices and how to use the PointPredictive products to our best advantage.”
During the event, PointPredictive showcased its solutions, including:
—Synthetic ID Alert, which can alert finance companies to potential synthetic identity issues.
—Auto Fraud Alert, which can provide 100 alerts and red flag indicators to finance companies based on comparing and validating information a lender receives on an application against data assets managed by PointPredictive
—Income Validation Alert, which can enable lenders to streamline their income assessment of borrowers.
“Our use of PointPredictive solutions has changed our company’s awareness around stopping fraud and misrepresentation within our portfolio,” said Eric Lin, general manager of Universal Finance Company. “The consortium roundtable event is a unique advantage to us and the industry in the fight to protect against financial losses of this kind.”
PointPredictive’s roundtable continues to grow as more finance companies collaborate to address fraud.
“The growth of our consortium and record attendance this year indicates that we’re on the right track in our approach to help solve auto lending fraud,” PointPredictive chief executive officer Tim Grace said. “When we launched the auto fraud consortium two years ago, our mission was to bring the industry together in the same way we did in the past at other companies to address fraud in mortgage and credit card.
“Since fraudsters and unscrupulous dealers attack lenders serially, it is only through collaboration that the industry can address the issue,” Grace continued. “Our solutions are now scoring over 1.5 million new auto applications every month using shared machine learning models. We’re very proud of our growth and the positive effect we are having in the industry.”
Glenn Munro, executive vice president of defi SOLUTIONS, a PointPredictive partner that provides turnkey access to those PointPredictive solutions through the defi SOLUTIONS Loan Origination System, also addressed the attendees.
“We partner with PointPredictive because we have a common belief that shared fraud intelligence and scoring in real-time is the best way to combat the problem. PointPredictive is doing this the right way,” Munro said.
For further information on PointPredictive solutions or to join future Auto Lending Fraud Roundtables, contact PointPredictive at firstname.lastname@example.org.