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 [email protected]