Is Fraud Dominating Your Portfolio?

Is Fraud Dominating Your Portfolio?

Are you financing vehicles with fraudulent titles or drivers? Auto finance fraud will surpass an astonishing $8B this year, so the question isn’t a matter of if, it’s how much fraud is being financed in your portfolio.¹

Vehicles aren’t being hijacked and physically stolen at the same rate that identities and titles are being hijacked and altered to create synthetic identities with false income or employment information, and/or washed titles.
Fraud like washing lien holders or damage off titles, errors in lien perfection, fake identifies, and falsified credit information threaten losses that credit unions and banks really can’t afford to take. So how can you proactively combat fraud to grow a healthy auto portfolio?

It’s both simple and complex. (Because what isn’t in the banking industry?)

Spoiler Alert: there’s nothing new under the digital transformation sun.
Fighting auto finance fraud without technology is impossible because most lending and credit decision fraud can be caught by tech before humans. Are you shocked? Probably not, because there isn’t anything new under the sun when it comes to the necessity and velocity for digital transformation.

However, fraud isn’t happening because of a lack of technology. FI’s have some type of fraud detection measures in place. The tech infrastructure to catch fraud is in place but the fraudsters are still bypassing these security checkpoints and FI’s are taking the liability for the losses. So where is the breakdown? The fraud breaks through where the tech infrastructure isn’t integrated.

The friction isn’t for lack of technology. It’s the lack of integrated technology between systems. Gaps in data systems are targets for accidental and practiced fraud alike. This isn’t merely frustrating - it’s costly.

Here are 10 questions to ask of your fraud prevention strategy.
Does our institution…

Verify titles electronically?
Rely heavily on automation (robotic process automation or machine learned automation) to root out synthetic identities?
Perform timely, electronic lien perfection?
Have a process for rectifying lien-related disputes?
Identify the most frequent and severe type of financing fraud?
Seamlessly integrate lending, credit, and recovery data from each system in every area of the business?
Frequently and thoroughly research all types of incoming fraud to identify how it is taking place and “plug the holes” as soon as possible?
Monitor entry points for fraud like new account requests, new products or services requests, change of information for existing accounts, or change of address?
Have the budget for new or replacement systems that will better detect and prevent fraud?
Recognize other risk management priorities that are creating blindspots to fraud?

If you answered “no” to one or more of these it’s time to enhance your fraud prevention strategies with tools to catch fraud faster and strengthen your bottom line.

The (Bumpy) Road Ahead
Mitigating lending risk while maintaining a fraud-free portfolio has never been simple, and today’s challenges make it even tougher. Rising fraud losses, record-high delinquencies, and mounting operational pressures—from repossession backlogs to shifting regulations—are forcing lenders to rethink their approach. While it’s impossible to pinpoint exactly how much fraud contributes to delinquency losses, the impact is undeniable.
But it’s not all bad news. The demand for better fraud prevention is driving investment in new and replacement systems, making fraud-fighting infrastructure a top priority. The key? Leveraging always-on, AI-powered fraud prevention to stay ahead of emerging threats. Lenders who embrace smarter, more adaptive risk management strategies and technologies will not only reduce fraud but also strengthen their portfolios for long-term, sustainable growth.

¹https://www.autofinancenews.net/allposts/risk-management/fraud-exposure-expected-to-reach-8-5b-in-2025/