Tag: auto lending fraud

17
Aug

How We Help Auto Lenders Comply with Dealer Monitoring Regulations

I read an interesting article from Christine Pratt at AITE which was very interesting. You can read the article here - Are Indirect Auto Lenders the Real Target of the FDIC’s New Third-Party Guidance?

Something which we have known for years and now happening, is more regulation for Indirect Auto Lenders and the dealers that they work with.  The government has required mortgage lenders monitor their third party lenders and brokers for years.  We should know.  Many of the staff in PointPredictive were responsible for launching the broker and third party lenders monitoring tools in the mortgage industry.

 The FDIC is Honing in 3rd Party Monitoring

The Consumer Financial Protection Bureau’s has been pushing for more 3rd Party monitoring in the auto lending industry.  As Christine Pratt indicates, “The new FDIC requirements are heavily weighted toward the complete investigation of any third parties’ financial performance as well as ongoing monitoring requirements and will place serious constraints on lenders’ resources. It is incumbent on indirect auto FI lenders to very carefully examine this new guidance and be mindful of a very tight timeline for comments. The original comment date of September 12, 2016 has been extended to October 27, 2016—and right now there are no comments on the FDIC site. This should be an immediate call to action for indirect auto lenders, auto dealers, and the groups that work closely with them (American Bankers Association, National Auto Dealers Association, and the like).”

PointPredictive Offers the Industry’s Only Auto Dealer Risk Monitoring Network

PointPredictive provides the industries first comprehensive tool to help Auto Lenders comply with their 3rd Party Monitoring and risk management.

We began collecting information on the vast network of 40,000 auto dealers in the US to build monitoring tools which can dynamically help lenders understand the fraud, credit and performance risks of dealers across the industry.

From our experience, less than 10% of auto dealers represent the majority of the fraud and early payment default risks for auto lenders. Our Dealer Monitoring Solution provides auto lenders with an early warning system to identify those very few bad apples in the bunch so they can improve their overall loan quality.”

Dynamic Monitoring Updated Each and Every Transaction

As part of the Dealer Monitoring Solution PointPredictive leverages proprietary technology which update s for each and every transaction that a dealer submits to the system.     The dynamic monitoring ensures that good dealers are not penalized, and dealers that are risky are identified at low false positives.

Auto Fraud Network Alerts

As part of Dealer Monitoring, the solution provides alerts from the network about prior fraud experience.  We know from our analysis of 3rd Party Monitoring, the ability for lenders to share their information on fraud risk is critical.  The mortgage industry has been doing it for years, it’s time the auto lending industry had the same types of tools and alerting programs.

Portfolio and Application Level Analysis

As part of the Dealer Monitoring Solution, PointPredictive offers the capability of retro-scoring entire portfolios to mine for the level of outstanding risk.

We often find that the first retrospective analysis is capable of identifying the most serious and risky dealers on the books with a lender.

The retrospective scoring can also help identify underlying loans that represent the greatest risk of default if the lender is servicing the portfolio.

Hosted Service for Rapid Setup

Lenders that are short on time or that require an immediate setup of the service can be setup relatively quickly at PointPredictive through batch hosted dealer monitoring platform.   This helps lenders that are short on time for compliance become compliant very quickly.

Thanks for Reading.

Thank you for reading and if you would like to reach us, contact us at fmckenna@pointpredictive.com

04
Mar

PointPredictive Launches DealerTrace

dealertrace-small

PointPredictive, Inc. today launched DealerTrace™, a comprehensive analytic solution designed to address auto-lending fraud and compliance risks. DealerTrace helps auto finance lenders manage applicant risks, including early payment default and fraud, and the risk of their dealer relationships.

Auto lending fraud occurs when information on an auto loan application is intentionally misrepresented by the borrower, a sophisticated fraud ring, or in some cases an unscrupulous dealer. When application information is manipulated, the lender may unknowingly underwrite a risky loan. Fraud presents a problem for auto lenders because loans that have misrepresentation are more likely to result in early payment default, a term lenders use to indicate when no payments are ever made on the loan.

“Our analysis and experience suggest that less than 10% of auto dealers represent the majority of the fraud and early payment default risks for auto lenders,” said Frank McKenna, Chief Fraud Strategist at PointPredictive. “DealerTrace provides auto lenders with an early warning system to identify those very few bad apples in the bunch so they can improve their overall loan quality.”

DealerTrace uses pattern recognition, a complex statistical technique that has been perfected to detect fraud based on historical data mining. The solution analyzes historical patterns of fraud, early payment default and risky dealer activity and scores each application as it comes in to the lender from a dealer. Lenders are automatically alerted when an application has a significant number of application anomalies or presents known fraud patterns. The lender can then review the application and take action before it is approved. Over time, if a particular dealer submits many applications with similar fraud patterns, the solution will alert lenders to take appropriate dealer action.

With the launch of DealerTrace, PointPredictive is forming an Automotive Lending Fraud Consortium and is encouraging lenders to share their fraud data. By pooling data at an industry level, PointPredictive can help lenders aggregate their fraud knowledge, identify new fraud patterns more quickly and in turn reduce their risk by getting in front of the fraud.

“Creating and managing a fraud consortium is a core competence for PointPredictive,” stated Tim Grace, Chairman of PointPredictive. “Members of our team used the same approach for mortgage lenders a decade ago, which resulted in reductions of 50% or more of their fraud and default losses.”

To join the Automotive Lending Fraud Consortium or to request additional information, contact fmckenna@pointpredictive.com