Fleet News

Fraud warning over sub-let vehicles

Fleets operated by small and medium companies have been warned to be aware that criminals are fraudulently obtaining new cars and then sub-letting them on to innocent parties.

Managers of smaller fleets and companies who require cars, especially prestige models, for short periods are most at risk.

With the economy slowing and automotive finance companies, dealers and brokers keener to write new business, criminals are increasingly trying to obtain credit for new vehicles and to obtain cars through fraudulent contract hire deals.

“When they know business is quiet, they know it is easier to get through,” explained Martin Parr, fraud and compliance manager, BMW Financial Services.

“With the financial downturn, there could be an increase in this type of fraud.”

He said much of the fraud is occurring at dealerships and then being detected by companies such as his.

Point-of-sale car finance, which is provided directly to end-users by motor dealers, has jumped by 6%, from £11.3 billion to £12 billion in the last 12 months.

Point-of-sale finance now funds 49% of all new private car sales, compared to 47% in 2007, according to new figures published by the Finance and Leasing Association (FLA).

“Point-of-sale motor finance has remained attractive to customers during current tight credit conditions.

"It has grown in popularity in 2008, as consumers are finding it more difficult to get credit elsewhere,” confirmed Paul Harrison, head of motor finance at the FLA.

While tackling this fraud is difficult – criminals are going to considerable lengths such as buying companies and securing credit ratings for them before attempting to deceive the vehicle or finance suppliers – there are new trends emerging.

One such trend is the sub-letting of high-value vehicles that have been obtained fraudulently.

“Everything looks perfectly legitimate,” explains Mr Parr. “We get paid. And then the payments stop and the legitimate lease company often begins to receive a suspicious amount of parking or speeding tickets.”

Then the finance provider is forced to follow an often convoluted trail in search of its car, which may involve several hire and lease providers until an end-user – sometimes innocent – is found.

However, the end user is not always innocent.

A new BMX X5 was recently fraudulently obtained and then sub-let twice.

It was recovered only after a police chase and was badly damaged.

As Mr Parr said: “They tend not to look after your vehicles.”

While some fraudulent automotive finance applications are from companies and individuals who are finding it hard to get credit legitimately due to stricter rules, some criminals are using the financial downturn to enter multiple fraudulent applications knowing some will get through.

“If you can’t get the finance legitimately, you will use fraud to get it,” said James Baird, partner and unit head of banking and asset finance at HBJ Gateley Wareing LLP.

They are then obtaining new cars, which can end up being leased onto legitimate companies.

To combat the increase in fraud, the City of London Police Economic Crime Department has been expanded to cover England and Wales.

“In the UK there is no national fraud strategy,” explained Detective Sergeant Matthew Bradford. “We believe that the scale of fraud is massively under-reported.”

Current estimates suggest that by the end of 2005, vehicle related fraud cost the UK economy £13.9 billion.

These frauds were committed by an estimated 65,000 criminals.

As a result, a national fraud reporting centre and a national fraud intelligence bureau have just been established to help in the fight against fraud.

In addition, AVCIS, the police national vehicle crime intelligence service, has been established to target criminals obtaining credit or vehicles fraudulently.

As delegates at a recent FLA automotive financial crime conference were told, it is not just car finance fraud that is on the rise.

“There has been a huge increase in false insurance claims,” said Paul Lambotte, head of AVCIS.

Criminals, he said, are insuring high value cars they do not own – often by duplicating details of cars they see in dealer showrooms or on the internet – and then claiming they have had an accident and need a like-for-like replacement car.

“The insurance industry is getting hammered by these criminals,” said Mr Lambotte.



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