Problems and solutions, from a session on fraud sponsored by the National Automotive Finance Association
Problem: Phony work phone number, which is actually a friend's home number.
Tip: Call to verify phone numbers a week later, not just when the application comes in. By that time, the friend who was coached to answer the phone 'Acme Plumbing' may forget and simply say 'Hello.'
Problem: Phony income statement.
Tip: Don't accept IRS forms as proof of income, unless they were prepared by a professional tax preparer.
Problem: Bogus letters of employment, for small firms or self-employed applicants.
Tip: Spend an extra 30 to 40 cents per application to look up small firms in a local telephone directory or Internet directory.
Problem: Loan amount padded to include nonexistent optional equipment, such as a 'Ford Pinto with V-8 engine, sunroof and convertible top.'
Tip: Double-check optional equipment to make sure it is within reason.
Problem: The lender's own managers bend the rules to accept more deals, because they are paid strictly on volume.
Tip: Structure pay differently to reward profitable loans, not just volume.
Problem: Loans are approved with too many pieces of information missing and/or too many exceptions to the lender's own rules.
Tip: Raise the pay and qualifications for the people who verify information on applications. Have all exceptions reviewed by the original loan officer who approved the application.