ID Fraud for Auto Dealers

4 Ways to Protect Car Dealers From ID Fraud

Selling a car to someone – only to discover later that the transaction turned out to be fraudulent –  is a shared fear across auto dealerships.  It is an expensive problem that risks damaging your reputation.  Not to mention, an unwelcome distraction to the business of selling cars. 

During these “self-isolating”  times – and very likely the post COVID environment – consumers are spending more time shopping online than ever before. Unfortunately, reports of ID fraud for auto dealers are on the rise as well and their methods much more sophisticated.  As a result, dealerships need to be vigilant. Do you have the right tools and culture in place to protect your store – and your customers?


Have A Strategy to Combat ID Fraud for Auto Dealers

Before you start analyzing customer behavior, make sure your customer verification ‘strategy’ is as strong as possible.  Here are a few things to consider:

1. Update your tech

Identity thieves are constantly updating their methods, which means you need to do the same in order to stay ahead.  Consider adding a driver’s license authentication solution to your sales process. In just seconds, technology performs 50+ forensic tests in real-time for robust authentication – on any driver’s license or any other government-issued ID.  This small investment upgrades your dealerships capability to better identify, manage and avoid fraud  – ultimately protecting your business, your reputation and your customers safety 

2. Take advantage of identity verification services

In addition to document authentication, identity verification provides a vital service by flagging information that on the surface may seem true, but in reality, is questionable. These warning messages focus on high-risk applicants’ social security numbers, driver’s licenses, and addresses.  The service validates customer information against reliable databases while looking at a customer’s credit behavior and credit relationships over time to uncover undetectable risks.  

Out of Wallet (OOW) questions designed to speed the verification process and keep your customers in your store are available instantly – providing multiple-choice questions that would be hard for an identity thief to answer. The verification service also screens the applicant against watch lists such as (OFAC).  These services provide automated, consistent, and objective decisions that enable faster approvals, raise detection rates, and lower potential losses. 


3. Have a Strategy to Combat Abnormal Behavior in the Dealership

Once you have a strategy in place and your employees are familiar with the protocol you can begin to analyze customer behavior. Here are a few things that should be considered abnormal:

– The buyer comes in knowing exactly what they want

Obviously, if a customer comes to your location and knows what car they want without looking around, it’s not cause to call the police. However, make a note of it and watch to see whether any other red flags come with their one-car devotion. If a visitor is planning to buy a car with someone else’s information, they’ve likely planned their purchase out well in advance, including the exact car they want to leave with.

– The buyer acts distracted or impatient

Purchasing a car is a significant event in the average person’s life, and if they’re acting otherwise, it might be a sign that something else is going on. Potential fraudsters tend to be on their phone throughout the purchasing process because they often aren’t working alone and are in close contact with a partner or partners. They also generally won’t want to linger on the lot any longer than necessary. If your buyer doesn’t seem to have any interest in the car’s features or abilities and just wants to drive it off the lot right now, you may be dealing with a malicious buyer.  Follow your instincts.  Additional identity verification may be warranted. 

– The sale is too easy

As a professional in your field, never ignore a gut instinct. If a sale seems much too easy, there’s likely a reason. Does your customer have excellent credit and interest in financing 100% of the purchase price? Do they accept the purchase price and quoted finance terms without hesitation, and without any negotiating?  These are potential red flag behaviors.  If you feel uneasy, trust your instinct. Engage with management in the necessary verification steps and remain compliant before proceeding with the transaction.  

4. Commit to a ‘fraud prevention’ culture 

Make sure you know what suspicious behaviors and documents look like. Equally importantly, make sure everyone on your staff does, too.  While you may or may not have a fraud prevention specialist on your team, the job should never be on only one person’s shoulders. Your employees and team members should have at least a basic working knowledge of how to detect fraud and be thoroughly aware of what tools and technology are in place for validating new customers and protecting your dealership against identity theft and fraud risks. 

As a team, it’s also important to have a formalized, compliant, and well-communicated process for handling high-risk applicants information that on the surface may seem true, but in reality, is questionable.  

By giving your employees and teammates the information and confidence they need to support their decisions when they’re wondering if they are dealing with a fraudster, you’ll stand a much better chance of identifying fraud before it happens. Having a system in place ensures safety for you, your business, and your customers. Learn more about ID fraud for auto dealers and the solutions we provide to combat it.

Pete brings over 40+ years of experience in automotive finance and technology as Founder and CEO of eLEND Solutions™. Founded in 2003 as DealerCentric®, Pete is leading the company’s evolution to an automotive FinTech platform focused on deal generation solutions that power transactional digital buying experiences for the retail automotive industry.

The platform specializes in hybrid digital credit, identity, and finance solutions - designed to accelerate conversions of digital end-to-end purchase experiences - concluding with a transactional, fundable deal structure.

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