The COVID-19 pandemic has accelerated the move to more digital and online processes for selling cars and trucks. That’s opened up new opportunities for dealers to grow their businesses, and new vulnerabilities for scammers to defraud dealers of their hard-earned profits.
The face of auto crimes is changing. Bad guys have pivoted from simple vehicle theft to more sophisticated financial schemes.
Before we can talk about some of the ways to avoid being a victim of fraud, it makes sense to understand a few of the methods perpetrators use.
HOW THEY’RE DOING IT
One method gaining popularity is the use of synthetic identities. That’s where a fraudster weaves information from several different sources to create one false credit profile. The car buyer looks good on paper, but that person doesn’t exist and literally takes the money and runs.
Another scam is accomplished through “credit washing.” A would-be fraudster recruits accomplices with bad credit to buy vehicles. They complain to the credit bureau their scores are low because they’re victims of identity theft. Federal regulations allow bad scores to be suppressed while the claims are investigated. They’re granted a “cleaned up” credit report temporarily—long enough to qualify for credit and take possession of a vehicle. Of course, they skip off with a new car or truck, without ever making a payment.
Intended use fraud is committed when a person claims he or she seeks financing as a single party for a personal vehicle. Instead, the vehicle is used in subleasing schemes, ride shares or for businesses. This is a growing problem for dealers when finance companies return contracts linked to intended use scams.
Cyberthreats can involve hackers from anywhere in the world inserting themselves into an online conversation between a dealer and a financial institution. They act as if they’re the finance company and tell the dealer there’s a new routing number they should use when sending the funds to the institution. Of course, the routing number leads to the criminals’ banks.
The number one defense dealers have against fraud is an attentive and well-trained team. Sales professionals are great at reading people and developing relationships. Those same skills can help smoke out potential fraudsters. Consider the customers’ stories on why they’re purchasing another vehicle, and if it doesn’t feel right, slow down and check things out.
Checking things out means looking for obvious errors in the customer’s paperwork and not just tossing things like proof of income, employment or residency in a folder. Look for misspellings, typos or out of alignment numbers. Those are red flags.
TRAINING IS KEY
At Ally, we offer classes on fraud awareness, legal awareness and compliance—a wide variety of courses to help dealership staffs recognize and deflect fraud attempts.
It’s also good practice to compare notes with other dealers and warn each other of potential scams.
In the end, we want to help give dealers the best chance of weeding out fraudsters by empowering their teams, helping them to hone their instincts and protect their businesses.