In the wake of large natural disasters like Hurricanes Harvey, Irma and Maria, lenders tend to see an upsurge in credit applications for auto loans. In fact, strategic lenders provide financial relief in the affected areas, offering better rates, 0% APR, alternative payment arrangements, and even payment relief. These efforts help consumers get back on their feet; they help the local economy; and, they help lenders capture more auto loan volume. However, no good deed goes unpunished because this relaxing of credit standards has the potential to make it easier for criminals to perpetuate identity fraud.
Think about it for a minute.
Your institution is processing more credit applications for auto loans than it has in the last three months. Your team is stressed and overworked as they try to capture as much business as possible. You’ve temporarily relaxed your standards as consumers with totaled vehicles are trying to trade them in even though they are upside down in their current auto loan. How easy do you think it would be for a person with the social security number of a relative, and who knows previous addresses and phone numbers, to slip through the system?
While relaxing your lending standards to help consumers affected by natural disasters is a noble idea that is beneficial for consumers, dealers, and your institution, it’s also important to stay vigilant on your compliance procedures. Do your due diligence:
- Provide additional fraud detection training for your loan officers.
- Work with your technology provider to implement additional stipulations and/or identity verification questions for all loan applications.
- Ensure any updates to your procedures are documented.
- Make sure all indirect consumer loans are standardized.
- Monitor and document all training, forms and compliance efforts.
Of course, there’s only so much you can do to detect and prevent identity theft when consumers apply for credit through a dealership. That’s why it’s so important to develop strong dealership relationships. Remember, dealers are facing the same issues when it comes to preventing fraud. And, they are just as motivated to work with you to enhance their identity theft prevention process. Continue reading