Lending Curve

Contributing Author:
Steve Roennau
Vice President
Compliance
EFG Companies

The Association of Certified Fraud Examiners (ACFE) calls it the Fraud Triangle – pressure, opportunity and rationalization. But dealers and auto lenders call it, “Yet one more thing to deal with during the pandemic.” As economic stressors continue and employees are increasingly burdened with coronavirus countermeasures, the risk of auto lending fraud slipping through the cracks grows.

How can you keep your credit union – and your dealer partners safe? Keep an eye out for the traditional bad actors as well as the new tricks these bad actors are deploying.

During the early days of the pandemic, dealership doors were shuttered and consumers remained sheltered-in-place. The trend toward digital sales accelerated, with dealerships forced to conduct business online and via phone. For Group 1, one of the largest auto retailers in the nation, online-generated sales tripled in May compared to pre-COVID-19 usage.

An online-only platform means verifying financial details and detecting fraud before the deal is passed to the lender has become more challenging. According to a recent report from Javelin Strategy & Research, total identity fraud losses reached $16.9 billion in 2019. Account takeovers rose 72 percent in 2019, with the criminal taking over a full account in more than half of the instances. When taking over an account, criminals assume an identity with multiple account updates such as: Continue reading →

Contributing Author:
Brien Joyce
Vice President
EFG Companies

Looking for a ray of sunshine these days? Consider this…credit unions are in a much stronger financial position to weather the COVID-19 pandemic and the looming economic fall-out versus the Great Recession of 2007-2009. According to the quarterly Trendwatch report from Callahan & Associates, as of March 31, assets held in the United States stood at $1,663.3 billion and capital registered at $193.4 billion – double those respective positions on Dec. 31, 2007. Member relationships were also stronger than those recorded in 2007, proving that at least some lessons were learned from that recession event.

There were also some bright spots in Q1 2020 metrics. Credit unions notched the largest ever quarterly net liquidity increase in Q1 2020 to $50 billion, providing lots of flexibility for strategic moves. This liquidity enabled credit unions to extend an additional $5 billion in credit card lines in the first quarter compared to the fourth quarter of 2019.

Buoyed by consumer confidence early in the first quarter, first time mortgages accounted for over a third of the quarter’s originations. Fixed rate mortgages more than doubled from Q1 2019 to Q1 2020, reflecting historically low interest rates. But a cloud did darken overall loan growth by 1.2 percent for the 12 months ending March 31, 2020 compared to the 12 months ending March 31, 2019. Continue reading →

Contributing Author:
Steve Roennau
Vice President
Compliance
EFG Companies

In February, the Department of Defense (DOD) issued a statement regarding its interpretation of
the Military Lending Act (MLA). According to a filing in the Federal Register,

“The Department of Defense (Department) is amending its interpretive rule for the
Military Lending Act (the MLA). The MLA, as implemented by the Department, limits the military annual percentage rate (MAPR) that a creditor may charge to a maximum of 36 percent, requires certain disclosures, and provides other substantive consumer protections on “consumer credit” extended to Service members and their families. The Department is now withdrawing the amended question and answer number 2 (Q&A #2), published in the December 14, 2017 Interpretive Rule, which discussed when credit is extended for the purpose of purchasing a motor vehicle or personal property and the creditor simultaneously extends credit in an amount greater than the purchase price of the motor vehicle or personal property.” – federalregister.gov/d/2020-04041

This statement follows a joint petition filed in January 2018 by the National Automobile Dealers Association (NADA) and the American Financial Services Association (AFSA) requesting the DOD review the interpretation. When the DOD issued its 2017 interpretation, there was no public notice or opportunity for the NADA and other retail automotive trade associations to comment on the implications. Continue reading →

Contributing Author:
Brien Joyce
Vice President
EFG Companies

Credit unions are guided by a series of internal, state and federal rules and regulations pertaining to data security. One example is the requirements established by the National Credit Union Association (NCUA). This entity has set forth the IT Security Compliance Guide designed to summarize the obligations of credit unions to protect information in specific situations. One specific situation is the proper capturing – and disposal of information. It is often this situation, and the role of credit union partners and administrators, that puts a credit union at risk for a data breach. Let’s take a look at the guidelines and the opportunity for risk.

The proper disposal of information requirements in the Security Guidelines applies to any personal information a credit union obtains about an individual. But those requirements also extend to a credit union’s providers. A credit union must require its service providers that have access to consumer information to develop appropriate measures for the proper disposal of the information, regardless of whether a loan is ultimately secured. In essence, if a dealership provides credit information to a potential lender, that information must be disposed of properly whether the loan is completed or not. How often do you assess the information disposal practices of your partners? Continue reading →

Lending Curve

Recognizing Bad Actors

In A Position of Strength

New DOD Interpretation Opens Options for Lenders

Data Security Beyond Your Front Door