Nearly 750 cases of car finance fraud were recorded in the 12 months to September, an 11% reduction on the previous 12 months, although conversion fraud remains a worry, according to the latest figures from the Finance & Leasing Association (FLA).

Conversion fraud – selling a car with outstanding finance – was the most common and fastest-growing form of car finance fraud. Of the 747 cases recorded between September 2011 and September 2012, conversion fraud accounted for 270 cases (or 36% of cases), up from 250 (or 30% of all) cases in the previous 12 months.

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Conversion fraud also totalled 78 of the 197 cases (39.6%) recorded in Q3 2012, up from 66 cases (34.2%) in the same period of 2011, and up from 46 cases (25%) in Q2 2012.

In a statement, the FLA said it understood "tough economic conditions" meant customers may be selling their cars, without having paid off their loan in full, and therefore committing fraud, knowingly or not.

However, the overall reduction in fraud drew praise from Paul Harrison, head of motor finance at the FLA, who said that "fraud only affects a very small proportion of total motor finance agreements," and added "the work of the FLA’s members in combating fraud is paying dividends."

Range of fraud

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This year, the FLA has continued its sponsorship of the ACPO Vehicle Crime Intelligence Service for a sixth year to help combat fraud, as well as drawing together representatives from the Driving and Vehicle Licensing Agency, the Insurance Fraud Bureau, the police and other agencies to help tackle fraud and other vehicle finance crime.

Car information checking service HPI has also warned, in September, of the practice of conversion fraud and advised second-hand vehicle customers to be wary of vehicles with undisclosed Bill of Sale credit agreements.

Second-quarter figures from the FLA showed a rise in first-party fraud, whereby a customer takes out credit on somebody else’s behalf, which was the most common type of fraud at that point, although overall fraud was down by 6%. Application fraud was second and conversion fraud third, making up a quarter of cases in Q2.

Previous to that, the FLA reported a 27% year-on-year drop in car finance fraud for Q1 2012, with first-party fraud first, conversion fraud second, and application fraud third.

richard.brown@timetric.com