Saturday, April 13, 2024
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Lenders Must Reduce the Impact of Fraud to Improve Bottom Line

In the October 4 issue of Non-Prime Times, in his article “Lien Sale Piracy – What Every Lender Needs to Know”, Dennis LeVine identified an issue that is costing auto lenders millions of dollars each year, and it’s growing. He is absolutely correct when he says “a lender’s best strategy is to recognize potential fraudulent situations as early as possible….”

Currently, lenders have to rely on the people conducting a vehicle lien sale to also notify the lender. Not surprisingly, some notifications don’t ever make it to the lender. Some lenders receive an empty envelope via certified mail, or receive no notice at all. And despite the best intentions, DMVs don’t do a very good job of protecting lenders from fraudulent lien sales.

The same is true for vehicles which have been impounded. The impound agent is required to notify the lender of the impound, but it frequently doesn’t happen before storage fees have accrued, and often never happens at all. When a vehicle is presented at a port for export, the U.S. Customs Department has 48 hours to notify the lender so the lender can approve or decline the export, but how does Customs find out who the lender is before the vehicle leaves?

Electronic notifications level the playing field by providing lenders the opportunity to receive an electronic, independent source of lien sale events, impounds, vehicles presented for export, stolen and recovered vehicles, seizures, and others that frequently lead to an event that results in unnecessary losses or increased expenses for the lender.

Electronic notifications provide notice to the lender of events which put their collateral at risk within 24 hours of its occurrence, in most cases. A recent study shows that lenders receive electronic impound notices on average sixteen days sooner than they receive the paper notice, if they receive the paper notice at all. These electronic notifications give lenders the opportunity to take action long before the lien sale event and long before excessive storage fees accrue, and can prevent a total loss from the unexpected export of their collateral. They also give lenders the opportunity to work with their customer and insurance companies in the event of stolen or damaged vehicles.

The towing industry believes in electronic notification. Approximately 6,000 towers and repair facilities participate in With a lender’s VINs – no customer identifiable information – in the database, vehicle lien information can be provided to law enforcement and many NMVTIS service providers and DMVs to help prevent title fraud. Currently, approximately 85 percent of the financed vehicles on the road today are monitored electronically. A free test is offered so lenders can see first-hand the value of getting notifications electronically to eliminate unnecessary losses and expenses.

While fraud is a large and growing problem in our industry today, there are steps lenders can take to reduce the impact and improve their bottom line. Taking advantage of this available technology can save a lender many multiples of the cost.

John Griggs
John Griggs
John Griggs is the vice president of Locator Technologies. To learn more, please email him at [email protected].