Automotive finance fraud surges in first half of 2010, according to Experian
Nottingham, 7 September 2010 — Experian®, the global information services company, today revealed that automotive fraud rose by 35 per cent in the first half of 2010, overtaking attempted mortgage fraud in the second quarter to reach its highest level since early 2006.
On average, 34 in every 10,000 applications for automotive finance were detected as being fraudulent between January and June. The majority of these were recorded in the second quarter of the year, when 47 in every 10,000 applications were fraudulent.
According to Experian’s latest Fraud Index , which highlights the evolving nature of fraud threatening the UK’s financial services sector, 19 in every 10,000 applications received by financial institutions in the first half of the year were identified as fraudulent – 33 per cent more than the second half of 2009.
First party fraud overtook third party identity fraud during April to June as the most common form of attempted fraud. First party fraud typically involves individuals attempting to hide adverse credit histories or misrepresenting their employment status to try and secure credit and other financial services which might not have been suitable for them.
Nick Mothershaw, Director of Fraud and Identity Solutions at Experian, comments: “As our analysis shows, fraud within the UK’s automotive sector is rapidly increasing. The growth in this area can be partly explained by the high value assets on offer that can easily be converted into cash, but the complexity of the sales process is also a factor. For fraudsters, this makes it a comparatively easier target than other finance providers. Despite this, our analysis shows that the increase in attempted mortgage and current account fraud underlines that providers need to invest to manage the risk of fraud and its potential impact on profitability.”
Fraud rates by financial product type
Automotive finance providers saw the greatest rise in fraud in the second quarter of 2010 with 47 fraudulent applications per 10,000 (compared with 25 in Q2 2009) - this is the highest level recorded in the last three years. More than half (64 per cent) of attempted automotive fraud involved individuals attempting to conceal adverse credit histories in their applications, while almost one in five involved inaccurate employment information.
The percentage of mortgage fraud also continues to steadily increase, despite dipping slightly in Q3 and Q4 2009. Figures now stand at 35 out of every 10,000 applications received were identified as fraudulent, more than double the 16 in every 10,000 during Q2 2007, when the economy was more buoyant. There were 37 per cent more attempted mortgage frauds in the first half of the year than in the second half of 2009, with the majority of cases involving applicants misrepresenting their situations or attempting to hide adverse credit histories in their applications.
Attempted current account fraud is one of the fastest growing areas within the UK’s financial services sector. In the past 12 months, fraudulent applications have shot up from 17 per 10,000 to 27 per 10,000. Identity theft accounted for around one-in-three attempts to open fraudulent current accounts in the first half of 2010, while false documents were spotted in 13 per cent of fraud attempts spotted in Q2.
Following a boom in attempted card fraud in Q1 2010, the number of fraudulent applications dropped to 18 in every 10,000 applications during Q2. This was substantially lower than the 25 in every 10,000 applications recorded during Q2 2009. Credit cards continue to be the financial product most commonly targeted by third party fraudsters, with identity theft used in almost 90 per cent of fraudulent applications in the first half of the year.
The insurance fraud rate fell during the first half of 2010, having hit an all time high of 16 fraudulent applications per 10,000 in Q4 2009. The figure has halved since then, now standing at eight applications in every 10,000. This is, however, higher than then seven in every 10,000 applications recorded in Q2 2009.
Experian’s Fraud Index is based on data derived from National Hunter and Insurance Hunter, the UK’s leading fraud prevention systems, operated by Experian on behalf of their members. These systems enable financial institutions to cross-match applications against in excess of 500 million records in Experian’s consumer database, as well as over 100 million previous application records, in order to spot commonalities and anomalies that are potentially indicative of fraud for further investigation.