Preventing Fraud

Preventing Fraud at Your Used Car Dealership: Expert Strategies

Fraudulent activity in used car dealerships has been a growing concern for many owners and their employees. According to the National Insurance Crime Bureau, auto fraud resulted in over $1 billion loss in 2019. It’s crucial to be aware of the warning signs and take proactive measures to prevent fraudulent activity from occurring in your dealership.

A prevalent type of fraud dealerships face is using fake identification documents. The automotive industry has seen a rise in the sophistication of fake IDs, making it increasingly difficult for employees to detect them. Automotive News reported that dealerships had lost millions of dollars in fraudulent deals due to counterfeit IDs.

To safeguard your dealership against fraudulent activity, there are steps you can take to mitigate this risk:

1. • Conduct thorough background checks on employees: One of the biggest risks for dealerships is internal fraud, where employees use their access and knowledge to commit fraudulent activities. It’s important to conduct comprehensive background checks on all employees, including criminal and reference checks. Implement strict hiring procedures and conduct periodic audits to identify red flags.

1. • Verify all customer information: Verify all customers’ identity before conducting any transactions. Ask for government-issued identification and cross-check the information with relevant authorities. According to Experian, synthetic identities have been on the rise, making it more difficult to detect fraudulent activity. Be wary of customers who provide incomplete or suspicious information and take the time to investigate any red flags. Putting the effort in upfront saves thousands in losses.

     To automate your STIP (stipulations) verification, consider adding GPS technology to help you monitor a borrower’s location and ensure that they report to their place of employment as stated on their loan application. This can help lenders verify that a borrower is employed and earning the income they claimed, reducing the risk of fraud. It also confirms their permanent residence.

1. • Use reliable payment methods: Cash transactions may seem convenient but can be risky. Encourage customers to use electronic payment methods, such as credit cards or bank transfers, which leave a paper trail and can help you track transactions. Be cautious of customers who insist on using cash and investigate any suspicious transactions.

1. • Check for counterfeit documents: Fraudsters can create convincing documents like driver’s licenses or insurance cards. Train your employees to look for signs of tampering or inconsistencies in documents such as pay stubs, utility bills, and reference letters presented by customers or employees. Implement strict document verification procedures and consider investing in document authentication technology.

1. • Keep an eye on your inventory: Regularly monitoring your inventory can help you identify any missing or stolen vehicles. Use GPS technology to help you keep a log of all vehicles in your possession to ensure accurate lot counts. GPS technology can alert you instantly if it detects unauthorized movement or a vehicle leaving the lot after hours. Consider adding additional security measures such as security cameras and safes for holding inventory keys.

1. • Protect yourself during the recourse period: Banks sometimes permit credit arrangements outside underwriting guidelines if the dealer signs. Protect yourself during the recourse period by verifying the customer’s creditworthiness and keeping accurate records of all transactions. GPS solutions assist in monitoring and locating your collateral should the need arise.

Following these tips can safeguard your dealership against fraudulent activity and avoid costly losses. In addition, keep in mind that fraud prevention is an ongoing process that requires vigilance and attention to detail. Stay informed of the latest trends and technologies in fraud prevention, and continuously train your employees to identify and prevent fraudulent activity. By doing so, you can help ensure the safety and success of your dealership.