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Compliance

To Catch a Thief

The magazine’s resident compliance pro says Red Flags tools aren’t foolproof. He offers four tips for vetting suspicious buyers who seem to have all the right answers.

November 2017, F&I and Showroom - Feature

by Gil Van Over - Also by this author

The recent rash of data breaches has heightened the risk of personal identity theft throughout the country. In fact, three dealerships with robust Red Flags programs and processes in place recently experienced alarming incidents involving identity theft.

Used in all three incidents was a synthetic ID, which involves the creation of a new identity using a combination of real and fabricated information. Also common in all three cases was a thief who successfully answered out-of-wallet questions. The third dealer, however, acted on his gut feeling, probed further, and uncovered the deceit.

"In response to the recent data breaches, I expect there will be a drastic rise in the number of Americans who place a freeze on their credit bureau reports. As retailers who deal with credit reports in order to complete a high percentage of sales transactions, you need to know how to deal with credit freezes."

A Red Flags Rule process lends itself very nicely to the edealership concept. In fact, many dealers leverage the same vendor they use to pull credit reports to also run an algorithm to vet for potential identify theft red flags. Unfortunately, this electronic vetting may not always be good enough, as the dealer with that gut feeling proved.

Also unfortunate is that answers to the out-of-wallet questions these vetting tools generate can be found in the credit report. If the thief had enough information to create a synthetic ID, it’s likely he or she has a copy of the credit report.

There were other red flags the vendor’s algorithm missed in those three incidents: The thief wasn’t from the area, had never done business with the dealership before, was purchasing a high-end but rather common vehicle, didn’t blink at MSRP pricing, and purchased every F&I product on the menu.

The dealer who successfully thwarted the theft was able to confirm the victim’s height and weight, which did not match the thief in the showroom. A quick call to the local police department resulted in the arrest of that individual. Had this dealer relied solely on the cleared Red Flags report from the vendor and a glimpse at the driver’s license, he too would have suffered a loss.

That dealer shared a few other tips you can use to vet a suspicious customer:

Tip No. 1: Check the email address provided with the online credit app to see if it makes sense for the applicant. “Carlygirl69@gmail.com,” for instance, doesn’t seem to make sense for a 65-year-old male.

Tip No. 2: Review the ID closely. On the photocopy, if the font for name and address is clear and sharp but the physical characteristics and photo are slightly fuzzy, the ID may have been altered.

Tip No. 3: Push the customer to reduce the loan term from 72 months to 48 months, which will drastically raise the monthly payment. If the person readily agrees, it’s likely the individual has no intention of repaying the loan and is likely an ID thief.

Tip No. 4: Ask additional out-of-wallet questions not generated by your vendor. For example, ask suspicious customers what their astrological sign is (based on their birthdate), in what state they obtained their Social Security number (based on the Social Security numbering methodology), or to describe their home (based on a Google Earth search).

In response to the recent data breaches, I expect there will be a drastic rise in the number of Americans who place a freeze on their credit bureau reports. As retailers who deal with credit reports in order to complete a high percentage of sales transactions, you need to know how to deal with credit freezes.

A credit freeze literally means that once the consumer places a freeze on his or her credit report, potential viewers such as auto dealers and finance sources can only access the information on the report after the consumer unlocks, or thaws, the report.

The consumer must activate a credit freeze with each of the three major credit reporting agencies — Equifax, Experian, and TransUnion. Part of the process of creating the credit freeze is a password or key code to thaw the freeze. When you encounter a credit freeze, do the following:

Step 1: Inform the consumer of the credit freeze and the need for both you and the finance source to view the report.

Step 2: Inform the customer that he or she must contact each credit reporting agency to request a thaw.

Step 3: Recommend to the customer that the thaw be set for at least a week once the personal password or key code is obtained. This will provide adequate time for potential finance sources to access and view the report.

Once thawed, you can proceed with the deal. Good luck and good selling.

Gil Van Over is the executive director of Automotive Compliance Education (ACE) and founder and president of gvo3 & Associates. Email him at gvo@bobit.com.

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