I.D. Fraud: Dealer Fights Expensive Problem with a Simple Solution

Let’s call him “Bill.”

At least that’s what’s on his identification. “Bill” is sitting in your F&I area right about now, working out the details of a new vehicle purchase. He’s going for a premium car, as well – with plenty of profit margin for you to enjoy. Yet something doesn’t feel right. Bill is a little cloudy on his out of wallet questions; he has the required I.D., but something is making your manager feel funny.

Sure enough, Bill is a fraud, trying to rip off your dealership.

He’s not alone. According to Javelin Research, U.S. consumers have lost at least $107 billion to identity thieves over the past six years. It’s a plague that spreading across most U.S. industries, and it’s especially acute at car dealerships, where auto loan fraud costs up to $6 billion per year (according to Point Predictive). Indeed, the Federal Trade Commission (FTC) reports that auto finance identity-theft complaints grew to 1.7 percent in 2017 – up from less than 1 percent in 2015.

The real cost to dealers? At least $100,000 per instance – not counting FTC fines levied against the store for not checking Red Flags. In fact, many lenders now require dealers to buy back I.D-theft-related deals. Think of it this way: the cost of the vehicle + re-buying the contract + lawyers fees + fines. Ouch.

Auto Group Gets Tough on I.D. Fraud

We all have heard stories about it. Not so long ago, an auto group came to us after experiencing four cases of I.D. fraud in one month!The dealerhad sold four vehicles to buyers whose driver’s licenses and credit info “checked out.” The bank agreed, funded the loans and signed the contracts. The vehicles were then shipped to the “buyer’s” given address, where the thieves cleverly intercepted the truck-driver, smilingly signed for delivery, and promptly drove off into the night! In fact, the thief-recipient of the car in California, knowing he had to meet the truck driver/vehicle right in front of the victimized family’s house, arranged for the car to arrive at 2 AM: arguing he owned a pizza restaurant that closed late and didn’t want his wife to be woken up by the transaction!

A Big Problem, Simple Solution

The auto group solved the problem by leveraging new scanner technology and enforcing a “must scan it” process. By deploying a simple-to-use, but extremely effective scanner and requiring all sales/F&I personnel to “scan it,” they were able to eliminate customer identity theft – and boost sales.

Tips for Handling I.D. Fraud

  • Invest in a scanner that incorporates the same ID verification technology used by the Department of Homeland Security (DHS), Department of State and global border patrols.
  • Implement a “must scan it process:” The scanner can only do its job if the team is require to use it for each and every transaction. By implementing this approach at the first point of contact, no salesperson can get the keys to take a car out or work any deals unless that customer’s ID has been scanned.
  • Integratescans into your workflow. Enter the vehicle stock number and the salesperson connected to the customer at the point-of-scan, so that you always know where each car is – and with whom. And, critically, be sure your scanner will automatically import customer’s data right into the DMS, so their pre-existing relationship with the dealership, and any lead or credit apps they’ve ever submitted, are immediately available to sales and F&I.


The Benefits of a Smart-Tech Approach

This comprehensive approach empowers employees to identify fraud and eliminate it. As a result, the auto group in question hasn’t seen any further attempts at I.D. fraud  – and even reports that their sales have increased by 10%due to the integrated and soft-pull nature of ID Drive, and – perhaps most importantly – protection against “pulled credit” lawsuits. The scanner also helps catch expired licenses, as well as ensure titling accuracy. There’s also the minor case of protecting employees who don’t follow compliance steps.

Ultimately, humans must catch other humans trying to get away with Identity Theft. There’s a whole lot of “Bills” out there, and they grow more sophisticated with every passing attempt. Catching them – or at least defending the dealership – takes a tech-first approach designed to give employees the information they need to stop “Bill” in his tracks.

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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