Thousands of car buyers run the risk of committing finance fraud

The Finance and Leading Association (FLA) have warned car buyers that they run the risk of committing finance fraud – a very serious crime – if they provide false information in a finance application or sell a car which has outstanding finance. The warning comes after the FLA released figures that suggest that there has been nearly 2,500 fraudulent motor finance applications made in the first three months of 2010.

The figures also reveal that in the twelve previous to March 2010, there were almost 10,000 attempted fraudulent applications made to motor insurance providers – worth a total value of £126.8 million. Despite rigorous checks by finance companies preventing that vast majority of those applications being approved, there were still 960 actual cases of fraud committed, worth a total of £15.8 million. Compared to the first three months of last year though, there has been a 3% decline in car finance fraud.

However, most cases of fraud may actually be committed unwittingly, with almost a third (30.8%) of motor finance fraud in the past twelve months was application fraud where a customer – sometimes unintentionally – gave incomplete or inaccurate information to a lender.

Almost as prevalent (29% of motor fraud) was the fraudulent sale of a vehicle which does not belong to the seller – known as conversion fraud. For most car finance arrangements, ownership of the car does not pass to the customer until the end of the agreement, so customers are committing fraud if they sell their car with outstanding finance. First party fraud was also significant, accounting for 27.7% of fraud cases in the 12 months to March 2010. This is where a customer makes their loan repayments using, for example, a false credit card. The ‘customer’ may also be illegally leasing the vehicle to another person, through a bogus car rental business, for example.

The Finance and Leasing Association (FLA) is using this week’s National Car Crime Awareness Week to make car buyers and sellers more aware of motor finance fraud and the potential consequences for buyers.

Paul Harrison, Head of Motor Finance at the FLA said:

“In just the first three months of this year there were almost 2,500 fraudulent loan applications to motor finance providers. Finance companies continue to work closely with police to combat finance crime, but it is vital that consumers are made aware of how fraud could affect them.

“Car Crime Awareness Week is an opportunity for us to raise the profile of this type of crime, and remind people that they have legal responsibilities when taking out motor finance. If they fail to disclose their credit history during the application process or try to sell a vehicle that is still on finance, they are committing fraud against their lender and may have their car taken from them.”