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Private car sales account for 40% of motor fraud

16th December 2009 Print

Almost 40% of motor finance fraud cases in Q3 2009 were committed by people selling cars which they did not own, according to new figures by the Finance and Leasing Association.

Around 25% of motor fraud involved applicants giving false information on their finance application form.

As a consequence of the recession, finance companies have reported an increase in the number of people selling cars before settling their outstanding finance - known as ‘conversion' fraud. Under a hire purchase or personal contract purchase agreement a customer does not own the car outright until all repayments have been made and an ‘Option to Purchase' fee has been paid (customers with lease agreements do not have the option to buy the car outright and so must return the car to the finance company).

Fraudulent deals cost the industry £3.4 million in the third quarter of this year. But the efforts of motor finance companies to combat fraud meant that the number of fraud cases fell by 29% compared with the same period in 2008. The figures show that at least 2,700 cases of attempted motor finance fraud were prevented in Q3 2009 alone. If these applications had not been detected, fraudsters would have stolen £35 million from motor finance providers. Industry action is helping to stop criminals, make the roads safer and save honest customers money. So far in 2009, motor lenders have prevented at least 8,500 fraudulent deals worth £100 million.

According to FLA figures, London remains the nation's motor finance fraud ‘hotspot', followed by Glasgow and Manchester.

Paul Harrison, Head of Motor Finance at the FLA, said: "‘Conversion' fraud is on the increase as some customers try to escape their financial commitments and profit from the sale of a car that does not belong to them. It is sometimes the case that a customer genuinely believes all the finance has been settled when it hasn't. Whether fraudulent or mistaken, this kind of car sale can cause distress for the third party buyer. I would urge anyone interested in buying a used car to run a car background check to ensure it is free of finance before purchasing it. Anyone having trouble making payments on their car, or on any other loan, should immediately discuss the matter with their lender.

"Finance companies have been especially vigilant during the recession so as to stamp out fraud, whether opportunist or organised. Fraud is not a victimless crime. Our work with the police is also helping to prosecute organised gangs who use stolen cars to finance drugs and firearms trafficking."