Fraudulent activity for asset finance products has seen a 162% increase, according to leading fraud prevention service Cifas.
As a result of the cost-of-living crisis, the asset finance industry is facing significant challenges, with rising costs causing a surge in fraud. The motor finance sector has been particularly hard-hit, seeing a 13% increase in fraud in the first nine months of 2022, compared to the same period in 2021.
With inflation at a 40-year high, more individuals may look to alter or provide false bank statements or wage slips to inflate their income in an attempt to appear more credit-worthy. This type of false application fraud has risen by 16% within the motor finance sector, and now accounts for almost half of all motor finance fraud cases.
Identity fraud also presents long-term challenges for motor finance, which has risen by 43% compared to last year. With the increasing shift to providing services online, fraudsters have been keen to take advantage, testing everything from the verification of identity documents to utilising current address fraud or previous address fraud in order to secure vehicles on finance.
Amber Burridge, Head of Fraud Intelligence for Cifas, said: “What is clear from our data is that the UK’s asset finance industry continues to face a sophisticated and evolving fraud threat, and this is likely to continue as a result of the ongoing cost-of-living crisis.
“Vehicles are of particular interest to criminals as they are a high-value, moveable asset which they can sell quickly – either here or abroad. Traditional challenges to the sector, such as asset conversion—where a vehicle under a hire purchase agreement is sold on before the agreement is settled— is also causing increasing issues for the sector. Our research shows that 1 in 7 people have or know someone who has done this over the past 12 months, up from 1 in 8 people in 2021.
“Selling a leased vehicle before the end of the term, even if you continue repayments, is illegal. If you are considering ending your lease early, check with your provider to see what arrangement you can come to. If you find yourself struggling with problem debt, don’t hesitate to reach out to your lender for help and advice.”
Jon Dear, Senior Policy Manager at FLA, said: “The economic downturn means more fraud opportunities, particularly impersonation fraud. The sub-hiring of vehicles on finance has also been noted. False income declarations are also on the increase as are the quality of driving licence forgeries. As inflation continues to rise, fraud opportunities will only increase, costing the sector more losses over time.”