Despite new survey results indicating perception of fraud in the marketplace, Point Predictive expressed concern that lenders failed to appreciate their exposure.
Nearly all of the prime lender executives responding to the Point Predictive poll felt COVID-19 created no additional fraud risk, and more than half of the subprime lenders saw either equal or less risk compared with before the pandemic. More than half of all lenders responding called their concern over fraud unchanged or reduced from 2020 to 2021.
"It doesn't seem like it's actually set in yet," Point Predictive fraud consultant Justin Davis told Automotive News on Tuesday ahead of the study's release.
Economic stimulus measures might have allowed borrowers who qualified for a loan through misrepresentation to keep current on payments, according to Davis. But the risk of the buyer's true financial situation catching up with them and the lender remains.
"It's just been delayed," Davis said.
Lenders shouldn't base their perception of fraud off pandemic conditions or rising prices that seem to reduce their exposure, Davis said.
"There's probably a bigger issue actually coming up," he said.
TransUnion reported Wednesday that 1.38 percent of auto loans were delinquent by at least 60 days during the third quarter, down from 1.46 percent a year earlier and 1.4 percent in the third quarter of 2019.
"However, as accounts roll off of hardship programs a slight uptick in delinquency is to be expected," TransUnion wrote in a news release.
Point Predictive received responses from 19 subprime and 10 prime lenders, though not all participants replied to every question. The company said the respondents rank among the top 200 auto lenders and collectively handled more than 100 million credit applications over the past several years.
"It's a very, very representative group," said Dennis Behrman, Point Predictive vice president of marketing.
Among other survey findings:
• Lenders were more worried about "first party" fraud from dealerships and customers than "third party" scammers with phony identities.
One inquiry found more than half of the respondents ranking misrepresentation of income or employment, dealer fraud (which could also include income or employment misrepresentation, but committed by the dealer rather than the borrower) and synthetic identities among their "most important" or "important" concerns.
• Twenty-three of the lenders viewed dealerships as responsible for at least 10 percent of the fraud incurred, with 16 of them estimating dealers' contribution at 20 percent or more.
• Seventeen out of 24 responding lenders felt at least 5 percent of the pay stubs they received carried material misrepresentations, with seven creditors estimating the total to be 15 percent or higher.