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ConsumerFi Podcast: 2020 Fraud Trends with Point Predictive’s Frank McKenna

December 24, 2020

Episode 10


Fraud expert and Point Predictive‘s Chief Strategist, Frank McKenna, joins Joel to talk about 2020 fraud trends including the unprecedented tax payer losses from COVID relief programs, how masks can lead to identity theft and the benefits of fraud consortiums.

Read Frank’s blog, Frank on Fraud, here.

ConsumerFi is presented by Nortridge Software: Loan Software That Accelerates Change

And special thanks to The National Automotive Finance Association: The only trade association exclusively serving the nonprime auto finance industry.


[00:00:20] Frank McKenna: [00:00:20] Frank

[00:00:21] Joel Kennedy: [00:00:21] it’s been too long

[00:00:22] Frank McKenna: [00:00:22] right? It’s been too long. It’s been a long nine months. You’re in lockdown. We’re probably don’t live too far from each other, but we never see each others. So it’s good to see you again.

[00:00:33] Joel Kennedy: [00:00:33] This is the podcasting version of sitting in the same household. And texting each other from different rooms.

[00:00:43] I would love to get over to, uh, I wish we could have done this over at the offices. How are your offices open? You

[00:00:49] Frank McKenna: [00:00:49] guys? Well, we’ve been shut down since March. Uh, we keep the offices open, but they’re definitely, um, we’ve got everybody kind of six feet [00:01:00] apart and we’ve got, you know, masks and we’ve got, it’s a lot of stuff.

[00:01:04] Around the office, but we rarely go in, it’s just much more difficult to go into the office and it is just, uh, you know, top hop on zoom. So we’re really. We’re really remote. Um, we do go into the office every now and then, and it is still open, but yeah. And

[00:01:21] Joel Kennedy: [00:01:21] for folks that don’t know, are you still in the same office that I was able to visit you in really, really nice office until Mar Heights and they can open, they have a lot of you, you can open the doors, right?

[00:01:32] Can’t you open the doors and make, uh, yeah.

[00:01:36] Frank McKenna: [00:01:36] Can open it up. Let’s try it in the courtyard. So we kind of, it’s a small space, but we can go kind of indoor outdoor. So it’s got a good seal to it. I’m looking forward to getting back there. Yeah,

[00:01:47] Joel Kennedy: [00:01:47] for sure. It’s a cool space, Frank. It fits you. Well, I think, um, you know, Frank, Frank is one of the cool guys, uh, helped me, uh, try to w what do we do?

[00:01:57] We, we took, uh, we took, uh, [00:02:00] A falsified identity up to the point of almost, uh, applying for credit. He showed me some, some cool stuff with that. I was, I was unaware of how easy that was. I’ve spoken about that in the past, but Frank, you know, people know you for your Frank on fraud, um, articles, and, and, uh, and I also know you for your photography, but what I learned about you recently is that you also compose music.

[00:02:22] Frank McKenna: [00:02:22] Yeah. That’s my hobby. Haven’t had a lot of time this year. Um, I had a son a couple of years ago and he’s taken 99.9, 9% of my time. But yeah, I always take the initiative to try to write, I call it an album a year. So between 12 and 15 songs, and I usually write like a song, um, a month and then I just compile it into a CD and I put it on Spotify and I put it on.

[00:02:47] ITunes. And I give copies to my family and it’s kind of a fun hobby, but I haven’t, I haven’t had enough time to do it lately, but I do love it.

[00:02:55] Joel Kennedy: [00:02:55] That’s cool. What kind of, what kind of, how would you describe the music?

[00:02:58] Frank McKenna: [00:02:58] You know, it [00:03:00] changes on a yearly basis. I’m, uh, I’ll go with the flow of the moment. So I go from, you know, it started off years ago, I was doing rap, doing rap songs, and then I moved into kind of folk.

[00:03:12] And then, um, over the last couple of years, it’s been more electronic. And, um, Monday we get more, I guess you’d call it modern drunk. So, um, it just varies. I’ll I’ll do anything. I’m a huge fan of all different types of music. Um, so I try every genre and I just love music. I do too. I can’t really pin it down.

[00:03:36] I, um, I get a chance to see, uh, you know, follow you on Instagram. And I see you’re pretty outdoorsy recently and doing a lot on sports what’s going on with you.

[00:03:48] Joel Kennedy: [00:03:48] True. So yeah, with the shutdown, it obviously limits us right. With a lot of the things that we used to be able to do. And even some of the outdoor activities that we used to be able to do, remember what they had kind of beaches shut [00:04:00] down.

[00:04:00] I mean, and you know, people want to go out and play volleyball. You couldn’t even do that. Um, yeah, so I’ve taken advantage of the opportunity to, uh, I work out in the morning just in my driveway and it’s, it’s getting fun now that it’s cold and people who know real cult are gonna laugh at our assessment that it’s cold here, but it’s like 40 in the morning.

[00:04:19] And, uh, and that’s been good. That’s been good. And then I play a lot of racket sports in the evening. Um, cause they, you know, I, I can do that and we actually play a game on the beach called beach tennis. So that’s a lot of fun. Um,

[00:04:32] Frank McKenna: [00:04:32] It’s nice to be able to did over the German. Did you do the over the line tournament?

[00:04:38] I thought I saw you on the beach,

[00:04:42] Joel Kennedy: [00:04:42] the line for anybody. Who’s not a San Diego. Um, go ahead and look up over the line and figure out the rules. And then maybe you might be able to inform me about what it’s all about it. To me, it appears to be a glorified version of, of wiffle ball. Um,

[00:04:55] Frank McKenna: [00:04:55] but it’s your game they’ve been playing for years.

[00:04:59] That’s good. And I’m the [00:05:00] Workfront you’re with Northridge now and yeah.

[00:05:03] Joel Kennedy: [00:05:03] Yeah. North Ridge is thanks for mentioning. North Ridge is a software that, uh, that I used on the loan management side, a couple of podcasts, uh, I’m going to have a podcast with this guy, Tom Wolf, who is my CIO advisor at the time when I had Pelican auto, uh, I was looking for a loan management system.

[00:05:22] We were about a year in, and actually I was servicing loans off of a spreadsheet and a QuickBooks. I kind of Frankensteined it into a loan management system. And I could tell that as we were growing, it just, wasn’t going to cut it. So we got with Ridge and we stayed with that system all the way through the duration of the, of the business.

[00:05:38] It’s, it’s still open to this day, so had great experience with them and kept in touch with that team. Been very impressed. I started off my career in high-tech. With, um, general electric. Uh, we were doing electronic data interchange. Uh, if that doesn’t date me, I don’t know what will, but, uh, um, yeah, it’s so refreshing to get back into high-tech and, and our, [00:06:00] our, uh, our head breasts are involved down to the ticket level.

[00:06:04] I mean, they are involved in everything from strategy setting, to building, to dealing with customer issues. You name it. Um, Anyway, I could go on and on, but thanks for asking me about them. Fantastic. And we’ve got some exciting things, you know, coming hopefully for the next year where we can provide some additional value and, uh, and I’ll get that out there.

[00:06:26] But, but how about, how about on your side, on the point predictive side, Frank, uh, I saw recently you guys added some, some more senior level staff and I’m sure there’s, there’s a lot of exciting things that are kind of beneath that.

[00:06:39] Frank McKenna: [00:06:39] Yeah. So we’ve, um, had a really, I’d say great year in terms of growth. So we took a series B investments.

[00:06:46] So now we’ve have a Napier park, um, invested in us and it’s helping us kind of grow to the demand that we’re seeing out there, you know, point predictive we’re focused on trying to power more trust in [00:07:00] lending. So I think what’s happened over the years is there’s been so much fraud that it kind of varies the.

[00:07:07] The lending process, um, with a lot of stipulations and a lot of things that kind of created a lot of friction. And we think with artificial intelligence, with data consortiums, that we can, you can free up a lot of that friction by letting the AI do the work. So, you know, thanks to the investment that we were, that we took were able to kind of scale up now.

[00:07:26] So we hired some. Real top-notch senior leadership to help us scale. So we, we brought in some new people. Uh, the consortium on Otto is just, um, growing faster than ever, you know, we’re scoring, um, you know, over 2 million applications now a month. Wow. The amount of fraud that we’re finding is like, it’s so scary.

[00:07:49] I mean, as we start to. Uncovered the rock. We’re seeing more and more fraud in that data. Um, but we’re also seeing a lot of demand on the mortgage side as well. So. Similar to, [00:08:00] to auto the mortgage side, has they grappled with fraud and risk? Maybe to a less extent, because it’s a more mature industry from a fraud risk perspective, but they do grapple with a lot of, um, burdensome stipulations and conditions.

[00:08:14] Like I got, um, I got a loan from my bank and I’ve been banking with them for 20 years and they, they had 27 separate stimulus stipulations for me to fulfill, to get my. Refinance on my house. So it wasn’t, it had the original one, but they were refinancing, but they wanted me to provide all this documentation.

[00:08:33] Um, it just so happens. All that documentation is actually at their bank so that they were asking me to go print it off, send it back into them. It’s just stuff like that. That happens that we can. You know, do common sense stuff to help kind of free up lending. And that’s where we’ve been focused. And it’s the, I think it’s a wave of the future.

[00:08:50] Everybody’s moving towards more digitization, more automation, you know, trying to make lending faster. So it’s, it’s been good. It’s been a very [00:09:00] busy year for us.

[00:09:01] Joel Kennedy: [00:09:01] That’s fantastic. Um, yeah. So in terms of, I mean, I’m sure you’ve been speaking a lot about the, you know, the recent fraud trends and I’m sure you have a point of view as to how COVID has kind of, um, influenced right.

[00:09:17] The, the, the, the fraud attacks or the types of fraud that, that, that people are doing. And. I’m sure some of it is opportunistic, but then some of it may be kind of, you know, we use the analogy of squeezing a balloon and things kind of move elsewhere. So if you shut one door, the fraudsters will find another door.

[00:09:36] Um, I mean, H how do you think the COVID and work from home and the whole thing have happened? Maybe we break it down and we say, how do you think COVID and work from home have, have, have impacted fraud as, as your, as you guys are seeing it.

[00:09:48] Frank McKenna: [00:09:48] Yeah. So the way I see it, I’m going to talk about fraud, you know, just generally, and not necessarily auto or mortgage where we focus, but COVID has created a [00:10:00] perfect storm for fraud.

[00:10:01] And if you think about what a perfect storm is, it’s like several factors converge at the same time. So if you think about COVID, it was really perfect for a real spike in surgeon fraud. Number one, you had. You know, it kind of global fear, you know, everybody, he was very fearful and when you’re fearful, you’re more likely to be subject to scams.

[00:10:21] Um, so you had that going on where people were fearful, then you had the law down and the lockdown created a situation where people lost their jobs. Um, and so you had people that were more desperate. There were probably more willing to, to commit fraud, to be able, just to survive. You know, these are good people that were forced into.

[00:10:39] Difficult situations. And then third, you have the government coming in and dumping, you know, 2 trillion here in the U S but 10 trillion worldwide through stimulus programs. So you have this perfect storm of lots of vulnerable victims, lots of people that are more desperate and then a lot of money. And that.

[00:10:58] $2 trillion that the [00:11:00] government put into the economy through STEMIs programs became the biggest money grab for fraud in history. I think right now in 2020, never before has so much been money, been stolen by. So many people in so short of a time, so that perfect storm created, I call it an avalanche of fraud and I’ll give three examples.

[00:11:21] First is the paycheck protection loan program that the losses on that program are about 65 billion. That’s a very conservative estimate, $65 billion. Keep in mind that was all fraud that occurred within about a 60 day time period. That’s just one part of it. Then you have the economic injury, disaster loans.

[00:11:40] Those are the loans that are for companies that are going through, you know, emergencies due to the pandemic. There’s about 25 billion in fraud that occurred there. And the OIG, the office of inspector general just released a major warning and he claims that 40% of those Eid L loans had fraud in [00:12:00] them.

[00:12:00] Imagine that a loan program with four out of 10 loans, having fraud in them, The impact to the U S taxpayer is probably 25 billion. And then if you take the unemployment fraud that’s happening and you probably see this because you’re in California, we have mountains of unemployment prior to the pandemic unemployment assistance program.

[00:12:20] There’s in California alone. I think they estimated 350,000 fraud. Debit cards were sent, um, for $8 billion in potential loss. Maybe it was a little bit more. So you’re looking at a hundred, over a hundred billion in loss, just from stimulus programs. To me, that is the fraud of the year, but it’s also the fraud maybe of all time, because there’s never been that much.

[00:12:46] That’s been stolen. Wow. So completely changed the game. There is so

[00:12:50] Joel Kennedy: [00:12:50] much to drill in on that. So I’m going to pick one just at random, right? So how about that? Fro the F the fraudulent, um, [00:13:00] recipients of unemployment. Okay. So I’ve been through the process. You, you fill out some forms, you, you authenticate yourself, you give your, your name, your SSN.

[00:13:08] They probably have a way to authenticate you. And then you’re in the system. Ha ha. How does, how does someone, how does one fraud that.

[00:13:17] Frank McKenna: [00:13:17] Yeah, it’s um, simple. And you could go on to kind of social media. You could go on to, you know, telegram any of these forums and they’ll tell you exactly how to do it. I mean, they’ll give you instructions about how to commit fraud, and it’s typically as simple as getting information off the dark web using somebody’s social, their address, name, and with that.

[00:13:39] Little pieces of identity information. You’re essentially stealing somebody’s identity information and you’re applying for unemployment benefits in their name. And when you’re, when you apply for those benefits, um, you can get a debit card and that debit card will have the funds transferred into it so [00:14:00] that every week you’ll get this check.

[00:14:01] And so what people were doing is going out, stealing. Tens and tens of thousands of identities, not just here in California, but across the U S filing these claims and getting. Debit cards mailed out to them. So there is, um, I don’t know if you ever see, you know, the King of Instagram damn bills area. Yes.

[00:14:21] Yes. I’ve seen

[00:14:22] Joel Kennedy: [00:14:22] this guy.

[00:14:23] Frank McKenna: [00:14:23] You’ve seen this, you know, the house he lives, right. Is he

[00:14:27] Joel Kennedy: [00:14:27] out and about or something?

[00:14:29] Frank McKenna: [00:14:29] Uh, he was in Bel air 65. It was in a $65 million mansion. His home when he moved out. Over 1000 unemployment claims were mailed to that address. So people were picking them up, you know, in the mailbox or whatever, but they’re using these mail drops to have the debit card sent to.

[00:14:49] So California did an analysis and his mansion was one area that a lot of unemployment claims were sent to. There was a $75 million mansion down the street that had like [00:15:00] 2000 unemployment checks mailed to it. Um, It just the, the sheer scale of this unemployment fraud is just off the charts. I mean, taxpayers are losing so much money right now due to this fraud.

[00:15:14] Joel Kennedy: [00:15:14] And there’s no recourse. I mean, once the money’s gone, it’s gone. Right.

[00:15:18] Frank McKenna: [00:15:18] It’s gone there and the government isn’t necessarily great at recouping that. So like a lot of banks. So if you think about all this money, it’s actually going into bank accounts, you know, you think about those debit cards. It has to go into a bank account and the banks identify sometimes these.

[00:15:35] Um, you know, pockets of fraud and it’s very hard to get it back to the government because the government doesn’t have a good mechanism for review keeping it. So oftentimes these banks are stuck in a rock and a hard place where they’ve frozen funds, government. Isn’t really great at getting it back. And so it’s just this money sitting out there probably in tens and thousands of bank accounts.

[00:15:57] That is rightfully the taxpayers. This can take years [00:16:00] for it to unravel. Oh my

[00:16:01] Joel Kennedy: [00:16:01] goodness. And I thought it was all through bank of America. I’m surprised I would be surprised at bank of America, intimately involved in this whole process of, of, of,

[00:16:12] Frank McKenna: [00:16:12] yeah, they are. They are. And they’ve, they’re probably the ones that identified those 350,000 debit cards through their own analytics and through their own fraud detection.

[00:16:22] Um, but you think about the scale of that 350,000. Debit cards that had to be frozen. Wow. That’s never happened before, but yeah. Bank of America was in California at least, you know, had the debit cards, but there was lots of different banks. Um, and it wasn’t only debit cards. The money could be deposited into bank accounts through ACH.

[00:16:42] And so that, that money was dispersed through banks all over the U S. In some banks, 96% of the incoming deposits they saw going into some of these stimulus programs were fraud. So they were just almost everything was fraud that was going to these banks. That’s amazing. Yeah.

[00:17:01] [00:17:00] Joel Kennedy: [00:17:01] I mean that Def that definitely, it definitely gets the headline.

[00:17:05] I mean, at a more tactical level, you know, you and I, uh, W we frequently see each other at, at, at non-prime auto lending. Uh, and obviously you guys have been doing very well within mortgage lately at a tactical level, uh, for these companies. Um, what are the issues of fraud that we see today? Uh, and how do they differ from maybe a year ago?

[00:17:27] Frank McKenna: [00:17:27] Yeah, it’s a really good question. So I think that the primary difference is you think about. You know, what’s driving fraud today. So we’re going into people might argue recessionary economy. And what happens in a recessionary economy, especially when you have forbearance programs is you don’t actually know yet how much fraud might happen, because what happens is you have.

[00:17:50] People getting loans then going into forbearance for 60 days. And typically it’s that first 60 days where fraud gets exposed. So we have this kind of lengthening out period where [00:18:00] there’s a lot of risks that’s gone into forbearance and we haven’t seen the true impact completely. So things look. Maybe really good, but they’re progressively going to get worse.

[00:18:10] And because we see it, uh, on the front end when we’re looking at applications. So when we’re looking at applications at point predictive and we have our own fraud team, we immediately, after March saw a 30% uptick using the same number of people in the frauds that we were identifying. So we saw just this immediate blip in fraud.

[00:18:30] Um, so we saw just a general increase in fraudulent activity due to. A few things. First was more people were appearing to manipulate their income and there was drivers that might’ve happened so they could have been unemployed. So they needed to fake their income or fake their employment. They could have had pandemic unemployment assistance, which actually made getting a car more affordable temporarily.

[00:18:57] Right. Because they’re getting $600 more a week. [00:19:00] I think it is yeah, 600 more. So they could all go out and get cars, but the income they had was temporary, but they had to disguise it to make it permanent. So they falsified in employment and falsified their actually their true income. So they had to disguise it.

[00:19:15] So along with that, Kind of increase in income risk. We saw a subsequent increase in fraudulent employers on a daily base. I think since March we’ve discovered 255 fraudulent employers covering 4,000. Different applications. We saw four 50 or I’m sorry, 50 or 60 million in fraud. So we saw these are fake websites with fake employers.

[00:19:42] They’re acting as verification of employment for borrowers that don’t have real income and we’ve just been catching. Three, four, five of these frogs and employers a day. Now there’s so much fraud and employment being used in applications. So I think that’s, that wasn’t [00:20:00] necessarily the case a year ago. So income and employment is driving a lot of the risks.

[00:20:04] Then we have the recessionary component, but we’re also seeing. More straw borrower risk. So we’re seeing as people, um, can’t afford the loan, or maybe they don’t have the credit as they’re going in and using people that have a job to stand in on the transaction. So they’re able or recruiting people to go in and buy the car for them.

[00:20:27] Um, and we’re seeing lots of evidence of. Yeah, we’ll see a co-borrower on an application. And then five minutes later, the co-borrower is removed and they’re applying to another lender with just a primary borrower, which suggests to us that the co-borrower is maybe the person supposed to get the car, but the lender doesn’t know that that Khobar existed.

[00:20:46] So it’s a strong bar situation. So we’re seeing a lot of that and increasing that. Um, and then we’re just seeing a general increase in identity issues. Synthetic continues to climb and identity and from talking [00:21:00] to law enforcement, because we, we have good relationships with a lot of the law enforcement agencies.

[00:21:04] The synthetic fraudsters are taking advantage of COVID by using the mask. So they’re going into dealerships that wearing the mask, they have identification, but you know, the dealer because they have the mask on the dealers, don’t get a good look at their face or the identity. So you have this whole.

[00:21:22] COVID, you know, um, issue with the mask and kind of preventing good identification. But there also, because lenders have gotten a lot more, um, liberal about online applications because they know nobody wants to spend an hour in a dealership, right. You can go online and get everything taken care of. So the fraudsters are going online, filling out these applications.

[00:21:45] And they’re only spending 10 minutes in the dealership to pick up the car. So we’re seeing a lot of those types of issues as well. So prod has shifted, it’s moved and it’s more damaging than ever. That makes so

[00:21:58] Joel Kennedy: [00:21:58] much sense. [00:22:00] I had the wonderful occasion to have a Chris Mitchum of Santander and Chris Chestnut of pay Exxon.

[00:22:08] And we were talking about omni-channel and how. Frank, if you wanted to purchase a car, you could end up starting off on a certain vehicle website. You know, I want to, I know specifically what I want to get some, some car then they’ll, they’ll nail you down to certain dealers. They’ll help you get your financing.

[00:22:25] You walk in that information gets passed through at the dealership, right? When you’re in there, they there they’re pulling your information up on their screen. So this is what omni-channel is all about is, is having all that information travel along. Um, but. Uh, you mentioned, you know, that kind of goes hand in hand with this fraud because, you know, knowing that people are going to do more and more with less steps and less in-person and when I’m in person now, you can’t even tell who I am.

[00:22:52] It just totally makes sense that people would use this as an opportunity to, to, to kind of take advantage.

[00:23:00] [00:23:00] Frank McKenna: [00:23:00] Yeah. And it’s a lot of times the dealerships are dropped. Not even, they don’t have to go in the dealership, they can drop off the car at the house. So you can go in and, you know, you’re when you’re at your own pace house, or maybe they’re standing in front of a house that’s for sale because they don’t want to give it a legitimate address.

[00:23:17] They’re going to dropping the car off. Yeah, they’re doing a quick check. The ID, maybe not pulling down the mask at all, or maybe pulling it down for a second. Uh, we talked to, um, Sergeant saucer with Houston police department, and that’s what a lot of the Kirks are doing just to quick the ID. I they’ll present an idea of a 70 year old man.

[00:23:36] It will be a 30 year old guy. That’s getting the car, but because of the mass, they can’t tell. So we’re seeing that increase in identity theft. That probably is only occurring because of COVID and the pandemic. Hmm.

[00:23:50] Joel Kennedy: [00:23:50] I mean, in, in terms of looking forward, Frank, when we think about, uh, where things are going, um, it seems like these problems, [00:24:00] I mean, they’re new pro uh, maybe it’s just the same thing over and over, and you you’d probably be the best to kind of put it forth in an eloquent fashion, but, um, like where do we see things going?

[00:24:11] And, you know, are there any cool new things that you’ve been seeing. You know, whether they’re integrated within your solutions at point predictive, or just generally speaking things that you see that you say, these things have promise. And I think they could really help to achieve that dream of, I want as little friction as possible with as much protection as possible.

[00:24:32] Frank McKenna: [00:24:32] Yeah. They, I think that, you know, we’re going to usher in a whole new, uh, I’d say array of fraud solutions that other industries are using currently, and that are going to be really compelling for the auto industry. And I’ve always thought, and I know we’ve, we’ve been on a panel together where we’ve stated the same thing.

[00:24:53] Everything’s going to go to the phone. I mean, consumers are using their phones. [00:25:00] To engage in clearing of steps. So some of the things I like, you know, like turbo pass is a great example. Um, I’ll give a shout out to them, um, their solution where you can, you know, write to your phone, opt in to have your bank statements.

[00:25:16] Upload it to the dealer or the lender. That’s key. You know, why do dealers continue to use the fax machine to take darkened copies of multi page bank statements that the lenders can’t read? So, I mean, that’s going to come in. I don’t think it’s a matter of if it’s just when. That’ll become the norm. Um, there’s driver’s license, photo verification, again, instead of having the, taking that driver’s license and putting on the fax machine and sending it to the lender, the borrower takes a picture of the driver’s license.

[00:25:48] It goes into the company, you know, we partner with companies that do this, where you can actually verify if it’s counterfeit or not, but then if you know, it can verify all of the information is correct. Um, but then you [00:26:00] have a really good image that’s stored. It was a high quality image. I think that’s going to happen.

[00:26:06] I think a lot of friends, God is going to now become in the background. You know, AI like my predictive offers or a lot of these other solutions, you know, so cure and Centrelink and all these identity solutions it’s getting better and better and better and more targeted over time. It’s going to come, come to the point where all of this stuff can be done with a few clicks.

[00:26:28] And it can be done immediately and the borrower can engage in everything on their phone and it’ll be a lot like, I mean, my, my dream would be if it was a lot, like getting the Apple card, I don’t know if you’ve got an Apple card, but to get an Apple card, you, you click a button, you know, they ask you two questions and then an Apple card gets downloaded onto your phone, about 60 seconds later.

[00:26:50] And then you get a physical card and it was all done in the background with AI, with data validation, checking. Auto lending could be that simple [00:27:00] someday. And I think that’s where it’s going to go. That’s

[00:27:04] Joel Kennedy: [00:27:04] fascinating. Have you watched, uh, as an aside, have you watched the social dilemma? Have you seen that on Netflix?

[00:27:11] Frank McKenna: [00:27:11] I haven’t seen that yet. Um, it talks about,

[00:27:15] Joel Kennedy: [00:27:15] it talks about how much, um, social media sites really know about us and how they. Apply different things to know what to present us. And their whole goal is just to keep us engaged, to keep us on that site more and more and more. And they talk about, you know, a number of things, but the level of science and detail behind this.

[00:27:38] I mean, I think you’ve heard people say I was, you know, my wife, me and my wife were pregnant and we were talking about cribs and. I have my iPhone nearby. And then all of a sudden I log on to Amazon and I’m getting confronted with all these banner ads for cribs or on, on Facebook. Right.

[00:27:53] Frank McKenna: [00:27:53] Something’s wrong with that?

[00:27:56] Joel Kennedy: [00:27:56] There’s something to it. But you know, my, the thing, my evil brain [00:28:00] kind of twisted and said, how are the ways that we can take this? And apply it in a very market-based reasonable way to protect consumers and protect businesses. There’s gotta be ways for us to absorb some of that, either methodology or some of the platform technology that they’ve established, I would think.

[00:28:18] Frank McKenna: [00:28:18] Yeah. And I think you’re absolutely right. Joel. I think that now there’s solutions like TLO and IDI core, where you can actually search online as social media profile. And I find them enormously helpful because when you have a synthetic identity, if somebody doesn’t have a Facebook or LinkedIn or any online presence, presence, that’s kind of an indication, it’s not a real identity.

[00:28:42] Um, but you know, there’s all of that’s just developing social media is, and your presence is. Awesome to find fraud. I mean, one of the first things we do when we want to find a Protestant employer is we Google search it. And if we see this came up like 30 [00:29:00] times in our consortium, but there’s no website and there’s no reviews.

[00:29:04] And the address they gave was a farmhouse in the middle of nowhere. I mean, all of that data, all those signals on what’s out there versus what’s being reported to lenders are going to be just so critical. So I think that’s the general new wave of the future too.

[00:29:21] Joel Kennedy: [00:29:21] We’ve got to work together to arm ourselves.

[00:29:23] I mean, and that’s why you and I have a relationship that’s based so much in. Community good. And our work that we do with the NAF. And I thank you for that. And I think point predictive for always being a participant, this fraud consortium. Can you just say a couple of things about broad consortium?

[00:29:39] Because I I’m aware of it. I know the power of it, you know, obviously at a fraud, um, you know, give a penny, take a penny is what I used to say, you know, in terms of the different domains of fraud that you can kind of participate in, but can you kinda just do the quick overview for folks? So they know.

[00:29:55] Frank McKenna: [00:29:55] Yeah.

[00:29:55] So the fraud consortium is basically a shared [00:30:00] intelligence database that we manage, uh, there’s over 35 lenders, 80 million transactions that have flown through it. And basically what it does is it allows lenders to share their patterns of fraud with each other. Um, and why it’s so critical and auto is what we see is a lender will get targeted.

[00:30:19] One or two times with the fraud scheme, but it may not seem like a big deal, but we may see that fraud scheme 40 or 50 times across, you know, the 40 or 50 lenders we have, and we can accentuate it and say, this is a bigger problem than you think so we can help them avoid it in the future. But also. It inoculates.

[00:30:38] So if you’re in the consortium, you’re kind of inoculated against future fraud because we’re seeing those patterns happen at other lenders that we could protect you from. So you may not be targeted yet, but the fact we found that pattern, if that other lender shuts them off, if they shut the fraudster down, They’re going to come for you next, but we’ve got you protected.

[00:30:58] So the concept is [00:31:00] like you said, put a penny and get a penny out. Um, the whole industry benefits because it unmasked the fraud patterns for everybody to look at. So fraud, isn’t hidden behind a rock somewhere where you can’t find it, it’s exposed and out in the open. And it’s doing exactly what fraudsters don’t want you to do, which is share the.

[00:31:19] Deviant patterns are doing. They want to meet, they want to maintain their anonymity. They want that fraud trend and that fraud scheme to go on forever because once they find something that works, they want to keep doing it by having a fraud consortium unit in the bud. And you force them to change. Much more rapidly and in doing so you force them into another industry or another, and you always had the, I mean, if everything and I use it all the time, kick fraud out of auto, that’s how you do it.

[00:31:46] You share intelligence, they go, this is just too hard. Why am I going after auto loans, I want to go up to something else. And then auto you push the fraud off and now you have a much safer lending environment. So there’s a proactive element to it as well. [00:32:00] And

[00:32:00] Joel Kennedy: [00:32:00] everybody benefits from the fruits of that.

[00:32:02] Right. Everybody

[00:32:03] Frank McKenna: [00:32:03] does everybody, the consumers benefit the dealers benefit because they’re not being targeted. The lenders benefit because of reducing losses. Um, yeah, so just fraud is good for nobody. I mean, it’s just a cancer on society where you have a very few people making it hard on everybody else.

[00:32:26] And stealing money from honest people. And so it, it just helps everybody well,

[00:32:34] Joel Kennedy: [00:32:34] Frank, I, I do thank you for your time and I thank you. And the point predictive team for being such, um, thought leaders in the industry and, and putting it out there and, and actually organizing folks. The fraud consortium is a fantastic example of some of the great work that Frank does.

[00:32:48] And Frank, your blog is Frank on fraud, right?

[00:32:53] Frank McKenna: [00:32:53] Again, fraud. Yeah. Check it out. Um, I read about a hundred articles a year on fraud. Um, I’m going out [00:33:00] there looking for what’s new and up, up and coming. Um, that’s where I really kind of focused a little bit on COVID and the pandemic and the stimulus fraud, because I’ve been writing a lot about that this year, but if I see a fraud pattern or trend, I write about it and, um, I just, I love to get the word out.

[00:33:15] So check it out. If you ever want to see what, uh, what’s out there and what’s new. Well,

[00:33:20] Joel Kennedy: [00:33:20] quite selfishly, you’re always one of the first people, if not the first person that I always call with anything fraud related and Frank, I think it would be great if we could have you back on again, check out Frank on fraud, his blog, and, uh, Frank, thank you so much for joining us.

[00:33:38] Frank McKenna: [00:33:38] Joel. Thank you. Thanks for all the support always. I mean, you’ve, since that beginning, when we started, you know, point predictive, you’re always a huge advocate and a huge supporter. In every way. So I, I can’t thank you enough. Well, we can get behind the

[00:33:51] Joel Kennedy: [00:33:51] kick kick fraud out of auto can’t. We, we can all agree on that.

[00:33:55] Frank McKenna: [00:33:55] I love it. My favorite, favorite quote, it’s [00:34:00] still all the time.

[00:34:03] Joel Kennedy: [00:34:03] All right, everybody. This has been, uh, Frank McKenna with point predictive. Uh, thanks again, Frank. Thank you. The consumer fi podcast has been brought to you by Northbridge loan software. That accelerates change. We’d also like to thank the national automotive finance association, the only trade association, exclusively serving the non-prime auto financing industry. [00:35:00]

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