Car dealers and lenders could require insolvency advice thanks to fraud

Car dealers and the firms that provide finance on their behalf could be at greater risk of requiring insolvency advice after it was revealed that fraudsters are using false information to dupe them out of millions of pounds.

According to the Finance & Leasing Association, 30 per cent of motor finance fraud was committed using falsified loan applications.

The total cost to car dealerships and their associated lenders was £2.9 million in the second quarter of 2011, the data shows.

While this was down 0.8 per cent year-on-year, the figures show that there is still a major problem with fraudsters attacking the industry.

A total of one in eleven fraudulent applications is successful, with 250 cases of undetected application fraud slipping through the net in the past 12 months.

In total, there were 835 cases of motor fraud across the year, representing a 12 per cent decline on the previous annual period.

To help themselves avoid the need for bankruptcy advice, Finance & Leasing Association members have been working with the police's Vehicle Fraud Unit.

According to the organisation, this helped prevent 2,100 cases of motor fraud worth £26.8 million in the second quarter of 2011.

As well as protecting themselves against financial ruin, the lenders have also managed to keep finance costs down for legitimate car buyers by limiting the amount of illegal trade.

Finance & Leasing Association head of motor finance Paul Harrison said: "Application fraud increases in tough economic conditions as people know that it can be difficult to get finance if they have a poor credit history, or an unsteady source of income

"But exaggerating their income, hiding previous addresses or giving false employment details to improve their chances of getting a car on finance is fraud and will be reported to the police."

He added that the body has now entered its fifth year of working with the Vehicle Fraud Unit, which has recruited extra staff to help prosecute even more fraudsters.

In other news, the Federation of Master Builders recently noted that its members are struggling for new contracts – a fact that could see some require insolvency advice to stay afloat.