So if you are an automotive dealership, new or used, how can you prevent being defrauded by customers that are improperly purchasing vehicles? A lot of times you’ll run into what’s called synthetic identities where somebody will come in with a fraudulent driver’s license or somebody else’s driver’s license and purchase a vehicle in somebody else’s name, where the credit is not authentic and even the money is not authentic. And now, you’re out the money for that vehicle because even if you finance the vehicle you have a little bit more protection, but most lenders have recourse for first payment default.
So if you’re a dealership and the first payment is not made, you may be on the hook for that vehicle. And the other hand, if you take a cashier’s check or certified check, sometimes that check could be falsified. So a lot of dealers prefer to do financing because it gives you some degree of safety or to have a wire transfer on cash deals. One of the things you may want to start doing is instead of just scanning the driver’s license or taking a copy, you might want to start doing some verification of their identity. There are services where you can find out the actual contact information for the person who is being represented to be the case, get their actual cell phone actual email, and actual home address, and contact them separately to make sure it’s really that person. Many times you can use social media to verify the identity of a potential buyer. But in this day and age with vehicles being $40,000 and up, one vehicle being sold to an improper buyer can put you out of business. Even if you make $5,000 a car, it may take you 10 cars to make up that lost revenue, and while you may have insurance coverage for fraudulent claims, sometimes there are big deductibles and it could affect your rates.
So you wanted to start verifying these transactions because whatever dollar amount that vehicle is, that’s the risk of the transaction not being authentic. Synthetic identities are just one type of fraud. Others are applications for credit or another where incomes are not correct where someone comes up with fake employers where somebody answers the phone and verifies employment. Sometimes there are credit repair schemes. If the bank finds out it was a fraudulent identity they can recourse the loan and put you back on the hook for trying to find that car. A lot of times these people are exporting them. They know they’re not going to get a title so they just either part them out or export the vehicle, that’s their exit strategy for the profit.
Another strategy that might be put into place is to stay in contact with other dealers in your area. Even if they’re competitors, you may want to form a loose collaboration of dealers because usually, these fraudsters work in chains where they’ll go to dealerships in an area sometimes the same brand because they found the buyer for a certain brand of vehicle or geographic area. And you may want to just put a hotline up of, you know be aware of this customer. Now make sure you get good legal advice. You don’t want to disparage somebody if they’re an actual legitimate buyer but sometimes these are discovered by Hey I called my buddy over at the Ford store I used to work with him and he told me about this guy. Don’t get don’t rely on getting lucky that you happen to know somebody, maybe put together a loose collaboration of colleagues in your area that can identify some of these fraudsters that are trying to get away with it. If you catch somebody and you filter them out from buying a car, maybe you can notify some of your colleagues at other stores.
Getting back to the payment method, most dealerships don’t take cashier’s checks anymore because they know that they could be forged or they could be fraudulent. In some cases, it’s an actual check, but if the source of funds is revoked, the check becomes void. There have been cases where somebody has fraudulently wire-transferred money to their account from somebody else’s account, got a cashier’s check, and then the first party who was defrauded from the money discovered their account was drained and put in a claim. That money was reversed and that cashier’s check was made void. There was a case where an older gentleman wrote a check to a landscape company for a hundred bucks to have his yard cleaned. Well, somebody got ahold of that check and got his routing and account numbers. They used that information to wire transfer $35,000 from his account into another account. Once the money was there, they bought a cashier’s check for $30,000 and they use that check to go buy a car. Well, in the meantime, this victim discovered that his account was drained of $35,000 and put in a claim with his bank. The bank realized it was forged and they reverse that payment. Even though the cashier’s check was already written, they voided that check. So here’s the dealership gets an authentic check, you can even call up the bank to check, and then the next day it becomes revoked. So a cashier’s check isn’t a hundred percent guaranteed. Even wire transfers sometimes have some risk to them.
So a lot of times when financing, verification of the identity is a good way to go. And I hate to say it but you know sometimes performing due diligence on buyers may be a required or best practice step in doing an automobile transaction in this era of fraud and there’s a lot more fraud even in the last 12 months we’re seeing more of this happening with our dealership clients. So if you have questions about how to prevent fraud, you may want to look at some of the suggestions on our website. You may want to book a consultation with an investigator to kind of go through some of the details in your particular dealership to see how fraud can be prevented with dealership automotive transactions.
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