Incidents of fraud, including identity theft and first- and third-party borrower fraud, have increased by 10% or more among equipment finance companies over the last two years, according to a new study from the Equipment Leasing & Finance Foundation.

The study, titled “Fraud in the Equipment Leasing and Finance Industry,” analyzes fraud in the equipment leasing and finance industry with an examination of the multifaceted nature of fraud, its financial impacts, evolving challenges faced by lenders of various sizes, and solutions to address and mitigate fraud.

The study was commissioned by the foundation and prepared by Kassem Consulting and Datos Insights. It utilized a multipronged approach, including a survey of Equipment Leasing and Finance Association (ELFA) members, in-depth interviews with executives from varying sizes of lending institutions, and an analysis of current fraud trends.

Key Findings

• Fraud types and trends – The study identified various fraud types prevalent in the industry, including identity theft, the use of legitimate credentials by criminal enterprises, first-party fraud by borrowing company owners, impersonation fraud and fraudulent invoice creation, among others.
• Financial impact – The financial toll of these frauds varies across small, medium and large lenders. A notable percentage of respondents either do not track or are unaware of the specific financial impacts, indicating a gap in fraud management advancements and prevention.
• Fraud detection and prevention techniques – Preventive strategies are vital to every company and include analyzing credit overextensions, scrutinizing bank statements, verifying state-issued documents and employing third-party solutions for identity verification.
• Institutional confidence and solutions – Institutions have a mixed level of confidence in their ability to manage fraud losses. Adopting advanced solutions like artificial intelligence (AI) and machine learning could be a future direction for more effective fraud mitigation.

“Fraud in the equipment leasing and finance industry is ever-changing, and this study is designed to help businesses meet the challenges to stay ahead of it,” Valerie Gerard, research committee chair for the ELFF and co-CEO of The Alta Group, said. “The study reveals current fraud practices and comprehensive strategies, including types of solutions and advanced technologies companies can deploy to combat evolving fraud threats effectively.”