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Dealers Need to Look Over Their Shoulders

Dealers Need to Look Over Their Shoulders

Threats of different natures come from ID thieves, the federal government and lenders.

The nearby driver made one erratic move after another. “I gotta get around this drunk driver!” I said to myself, contemplating the earliest and safest opportunity to pass him.

Eventually, my chance came. As I went by, I glanced over to see what this “drunk” looked like. I was surprised to see someone using his smart phone. He was texting, not drinking.

Welcome to one part of the new normal.

Another part is the slamming of dealerships. Identity thieves, the Consumer Financial Protection Bureau and lenders have all ramped up their respective games. Let’s consider how.

Identity Thieves.A recent story illustrates how sophisticated identity thieves have become. An apparent theft ring broke through a triple-lock system at a luxury-brand dealership earlier this year and stole between 2,000 to 3,000 customer files.

One of the customers whose file was stolen had purchased her car with a personal check, a copy of which was in the file.

The crime ring created an authentic looking driver’s license with the thief’s picture and the victim’s information.

The crew created a watermark check to make a down payment, using the victim’s banking information. The thief had a replacement insurance card and credit-application information.

The criminals hit on a hot Saturday afternoon. Traveling over 500 miles (800 km), they successfully returned home with two new two luxury vehicles.

To date, one vehicle was recovered. The other probably is on a boat to China or Russia.

Dealers are required to react to new and emerging risks as part of their programs for complying with Safeguards and Red Flags rules.

Because of the facts identified in this crime, dealers are wise to update their programs to include a policy on sales to out-of-state customers who are not personally known to the dealership. Some steps to consider include:

  • Validating the identification with the National Automobile Dealers Assn. titling manual.
  • Verifying a second piece of identification such as a work ID or credit card.
  • Asking and validating the out-of-wallet questions available through a number of sources.
  • Considering obtaining thumbprints and videotaping F&I transactions.
  • Calling to confirm insurance coverage instead of relying on an insurance card.
  • Determining why an out-of-town customer is in your dealership. Have the sales person innocently ask the question and record the answer. Then when the finance and insurance manager innocently asks the question later, confirm the story is the same.

Consumer Financial Protection Bureau. You can talk to a different industry insider each day for 30 days and get 15 different opinions on the strategies this agency will take to oversee or influence the oversight of car dealers it does not technically have oversight of.

But having a solid compliance program in place will help deflect claims of deceptive practices. This program must include education of regulatory requirements, established policies and procedures and follow-up auditing.

Lenders. Many of the subprime lenders are asking for copies of down payment receipts on deals that have defaulted, sometimes up to four years after the vehicle purchase.

They are looking for potential violations of the lender agreement which would require the dealer to buy the deal back. They are looking to shift the loss from them to dealers.

Three reasons that require a dealer buy-back?

  • A deal where the down payment receipt doesn’t match the amount disclosed as cash down on the contract.
  • Use of a credit card for the down payment.
  • A down payment that was paid after the contract date.

The new normal is time-consuming and requires greater diligence. But the alternative is unpleasant and wallet-thinning.

Continued good luck and good selling!

Gil Van Over is the President of gvo3 & Associates, a national consulting firm that specializes in F&I, Sales, Safeguards and Red Flags compliance. Visit gvo3’s website at

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