Life appears to be getting easier for the criminals.
At the end of last month, Leasing Life learnt that a high-profile lease fraud case is emerging from the collapse of a construction and engineering plant hire firm, raising the spectre of the Global EPP administration and prompting serious questions about what lessors can do to shield themselves from fraud as business insolvency levels rise.
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Lawyers working all over the asset finance industry have reported greatly increased levels of fraud in the last few months, in the wake of a first quarter which saw the
number of business insolvencies soar 57 percent year on year to reach a total of 5,483.
For British finance houses, the fear is one of these could end in a debacle such as the wind-up of Global EPP, which exposed more than 50 lessors to £64 million (€72 million) in losses, after 71 pieces of equipment turned out to have been financed 578 times.
Now it seems that history may be about to repeat itself. In the wake of a recent insolvency, lawyers have been instructed to take action in a multiple financing fiasco
involving hire company Euro UK Hire Ltd.
Euro, headed by Simon Mangan, is thought to have applied for finance on assets from at least four British lessors during 2007, before financing the same assets through three Irish providers during the autumn and into 2008
Now it is understood that lawyers have been instructed to sue the Irish financiers, should they offer no compensation to the British lessors. Further details are expected
as the month progresses.
The good news is that efforts to protect the industry from this type of deception are being advanced with the development of two information sharing services proposed by the Finance and Leasing Association (FLA).
The first, says James Baird of law firm HBJ Gately Wareing (which has provided consultation service for the project), involves a voluntary asset registry for members,
comparable to HPI’s register of car ownership.
As part of the scheme, the FLA intends to set up a partnership with a third party, which would inspect and photograph assets on location at the behest of potential financiers – thus decreasing the possibility of companies applying for finance on non-existant plant.
“If this service is priced to ensure a risk saving over sending staff to inspect assets, there could be a real significant uptake among UK lessors,” said one industry source.
In addition, the FLA is also working on a data sharing system with companies information service Dun & Bradstreet, again designed to prevent multiple refinancing by
holding information on registered assets.
IT financier Syscap is understood to have been the first to adopt the system on a trial basis, with 21 other companies in the process of application or testing at present.
Meanwhile, the National Association of Commercial Finance Brokers (NACFB) has set up a new committee to work with police, the Office of Fair Trading and other government bodies in order to combat fraud in the sphere of introduced business.
The NACFB, originally formed in 1992 in response to the growing incidence of fraud in the industry, says it has received an “increasing number of calls” in recent months
regarding brokers – including at least one asset finance specialist – charging exorbitant upfront fees for deals that are never concluded.
NACFB CEO Adam Tyler said: “I have seen this particular process a number of times, as customers are drawn further and further into a deal that never materialises, since
final conditions are impossible to meet.”
However, due to changes made to the Consumer Credit Act on 6 April, sole traders and business partnerships of three or fewer people now come under the scope of legal protection from advanced fee scams, entitling them to full refunds of any fees charged over £5 in the event of no deal being secured.
Elsewhere, legal proceedings are unfolding in the aftermath of the Gwent Fleet Management fraud, which saw leasing companies cheated out of £3 million in a scheme to finance vehicles already paid for by third parties.
According to Gwent Police chief constable David Nisbet, files relating to Gwent managing director Brian John Webb were passed on to the Crown Prosecution Service in mid-April, while Webb remains on bail. Nisbet said he expected a decision on sentencing to be made by the CPS in early June.
