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First party fraud' on the increase as overall motor finance fraud falls

4th September 2012 Print

‘First-party fraud', including 'fronting', was the most common type of motor finance fraud in the second quarter of 2012, according to the latest statistics from the Finance & Leasing Association.

First-party motor finance fraud usually occurs when a person takes out credit on behalf of someone else and a finance agreement is ‘fronted' when a vehicle is not being used by the customer who was originally approved by the finance company.  

First-party fraud accounted for 37% of all car finance frauds reported to the FLA in the Q2 2012. Application fraud accounted for 30% of all fraud cases in the same period, and conversion fraud (when a car is sold when it is still on finance) accounted for 25% of cases. The remaining 8% of fraud cases were identification or impersonation frauds.

Overall, motor finance fraud cases overall fell by 6% in Q2 2012 compared with Q2 2011. There were a total of 184 cases of motor finance fraud in Q2 2012, and 743 cases were reported by motor finance companies over the previous 12 months.

In Q2 2012, FLA member finance companies and their dealer partners prevented at least 1,760 cases of attempted fraud at the application stage. This helped to avoid losses of over £23.8 million from potentially fraudulent deals, which helped to keep the cost of credit down for car buyers.

Paul Harrison, the FLA's head of motor finance, said: "It's important that finance companies know who is driving their property for the duration of an agreement. This does not mean that a parent can't apply for credit to buy a car for their children, because the location of car will be known. Lenders are more concerned about customers handing cars to third parties who cannot be traced. A finance company will usually remain the owner of car until the final repayment is made and any breach of contract could result in a case being referred to the police's national Vehicle Fraud Unit for investigation."