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Auto Dealerships - Retail Credit Fraud / ID Theft


As the spread of COVID-19 continues, consumers are more willing to purchase items online, including big-ticket items like automobiles. However, with the shift to digital purchasing, retail credit fraud and identity theft are fast becoming serious areas of exposure and loss for car dealerships nationwide.

Risk vs. Reward

The reason: criminals can net exponentially greater profits from illicitly acquiring high-ticket vehicles and selling them overseas—sometimes for as much as 15 to 20 times the cash value than from simply stealing credit card numbers. By providing fake information on car loan applications, a criminal can profit by shipping these illegally acquired high-end cars to markets abroad.

With the stakes so high, fraudsters are resorting to increasingly sophisticated techniques and schemes, such as synthetic identity fraud (a type of fraud committed using fake information, combined with real and often stolen data, to create a fabricated identity), which is relatively new, complex and difficult to detect.

Prevention Checklist: Credit Fraud / ID Theft

The following steps can help reduce Credit Fraud / ID Theft losses:

  • Incorporate Credit Fraud / ID Theft prevention steps into a sales checklist. The completed checklist should be reviewed and signed by the Sales Manager prior to releasing every vehicle.

  • Verbally review the customer's name, Social Security Number, date of birth and address information on the credit report versus the credit application and other key identifiers (i.e., driver’s license, pay stubs, signatures).

  • Question multiple credit bureau inquiries within the last 30 days.

  • Confirm the accuracy of the number of months the applicant is listed on the credit bureau file(s).

  • Verify employment by contacting the employer directly and requiring a pay stub.

  • Verify insurance coverage by contacting the agent / insurance company directly. Request and document the policy number.

  • Verify funds at the bank and the date the account was opened. Review all Warnings or Notes given.

  • Utilize check or credit card verification services, especially for out-of-state checks or customers (i.e., Tel-a-check, Certegy).

  • Request a cashier’s check or certified funds for large down payments.

  • If you have any concerns, request additional information such as a utility or property tax bill to confirm the applicant’s home address.

  • Request two sources of identification for all vehicle sales, including at least one government-issued photo ID (photo copies of government-issued IDs are not acceptable).

  • Verify that the final signature matches on all documents.

  • All co-applicants should meet the same requirements as the primary applicant.

  • Swipe or run the customer's driver's license through your credit card approval machine in order to verify the validity of the license (check with your credit card service for availability).

Business Applicants

The following steps can help reduce Credit Fraud / ID Theft losses:

  • Request a copy of the typed Articles of Incorporation / Organizational Agreement for any Company / Corporations / Partnership / Limited Liability Companies (handwritten documentation is a red flag).

  • Be cautious of secretarial certificates attesting to officer / manager status where the corporate secretary and the officer are the same (i.e., look for the involvement and separate signatures of at least two individuals in the preparation of the certificate).

By reviewing the above warning signals and incorporating these best practices, your dealer clients can potentially reduce or prevent Credit Fraud / Identity Theft losses.

Warning Signs During Application Process

Pay attention to the following “red flags” during the buying or loan application process:

  • 100% internet or over-the-phone credit application

  • Cell phone number with unfamiliar area code

  • Cash down payment higher than normal, or unusual terms

  • Offer to purchase multiple vehicles by persons unknown to the dealer

  • Brokered deals

  • Out-of-state driver’s license / being out-of-state

  • Company check used to purchase vehicle

  • A walk-on customer enters the sales lot without a vehicle

  • One or two people are dropped off at the dealership

  • Knows the exact car they want to buy

  • Uses their phone frequently to communicate with someone throughout the transaction

  • Rushes the deal; wants to drive the vehicle off the lot the same day

  • Insurance policy issued the same date of the vehicle purchase

  • Insurance provider only confirms the existence of a binder for the applicant

  • Thoroughly review alerts, cautions, and warnings on credit bureaus

By reviewing the above warning signals and incorporating these preventative measures into your daily business practices, dealers can make a significant impact on Credit Fraud / Identity Theft losses.

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