ID Please: Combating Identity Fraud in the Dealership

By Denise Branch

In 2023, over 1 million identities were stolen or compromised in the United States resulting in losses of over 43 billion dollars nationwide.  Losses resulting from identity theft and/or synthetic identities were so significant in the auto industry, many major insurance carriers instituted adverse policy actions in an effort to encourage dealers to shore up their fraud prevention efforts.  More specifically, dealers who sustained losses due to fraud were faced with non-renewal, increased deductibles and/or escalation clauses which increase deductible amounts and reduce payouts for each fraud loss incurred during a plan year.

While fraudsters utilize varying tactics to execute their frauds, there are several common red flags that should warrant increased scrutiny.

1. Exceptionally good credit.  Fraudsters do not typically steal identities with bad credit. It is of no use to them.
2. Duplicate identifications of any form.  Thieves have to generate fake identifications to match the stolen identity.  If they are brazen enough to get these new identifications through government agencies, they will be marked as duplicate to indicate that more than one identification for this individual exists.
3. A customer who does not negotiate and agrees to purchase all back end product.  Fraudsters do not care about price or rate, as they will not be responsible for any payments and they simply want to be as agreeable as possible to get the deal finalized and the vehicle off the lot as quickly as possible.  These are the hardest deals for some staff members to thwart as they get caught up in the windfall of a big deal.  However, if a deal is to good to be true, it likely isn’t.
4. Any request to have a vehicle delivered to an address that is different than the customer’s address.  Many fraudsters will claim to be working out of town and request the vehicle to be delivered to their “worksite” rather than their home address.

In an effort to combat fraudsters, several vendors in the automotive space have developed identification verification systems.  However, these systems can be costly and generally allow only a limited group of users.

Despite the uptick in technology to combat fraud, a dealer’s best defense against this criminal element is a diligent and well trained sales and finance staff.  Dealers seeking training in fraud detection and deterrence should contact a dealer lawyer with experience in dealer operations for training guidance and materials.