As if dealerships did not already have enough to worry about as the COVID-19 crisis continues to impact the market…now there is the increased concern over online F&I fraud. Since so many transactions are online now due to customers staying home and taking delivery at their houses, the risk of fraud, particularly buyers using false identities, has popped back into the F&I radar.

Identity theft is a crime that costs businesses and individuals millions of dollars a year. This crime involves stealing another person’s identity through high jacking their Social Security Number and other personal info to help open new credit account. It’s someone who has stolen your kids’ info since he is only 12 years old and has not applied for credit yet.

But there is actually something worse that dealers have to worry about. Synthetic Identity Fraud. Right up there with ‘murder hornets’…one bad thing just gets worse.

Synthetic ID fraud has a criminal constructing a completely new identity cobbling together personal identifiers from several different people. The address, SSN, date of birth, address, and name of separate people. Not one person but bits from a bunch of different unsuspecting people and often under a fictitious name. identity
Some call this ‘Frankenstein’ fraud. The fake buyer is literally assembled using a patchwork of personal info and because this new identity is usually cultivated over a period of a few years, it may not be obvious to those trying to root out the crime.

Here are 4 ways your dealership can safeguard against synthetic identity fraud at a time when dealerships can least afford to have deals unwound…

Look Deeper at the Credit Report

One way to catch synthetic identity fraud is to look carefully at how long the buyer has had open credit versus their age. If your buyer is 45 years old and has he/her first credit account 5 years ago, that’s likely a synthetic identity. Anyone that old would have deeper credit history than just a few years.

If the oldest credit record is as an authorized user, that could also be an indicator of a fake identity. Criminals will use authorized user access as an easy way to start building out the credit profile.

CRO’s Can Give it Away, Too

Not to say that all credit repair organizations are bad but unfortunately many have a dubious reputation in the industry. When criminals have constructed their synthetic identity, CRO’s can be used to help repair profiles to give an air of legitimacy on the credit report.

Watch Those Driveway Deliveries

One of the more obvious tip-offs for synthetic identity criminals is how they prefer to communicate with the dealership throughout the transaction. Most like to avoid direct human contact if possible and prefer text, fax, or email rather than have a conversation on the phone or meeting in person.

In the current online state dealerships work within now, more online transactions will be had due to customers reservations about coming to a crowded store. If your dealership is leveraging an online F&I experience and doing at-home ‘touchless’ deliveries, consider having a mobile notary available if possible. The risks are too great that the person who takes the keys are not the person represented on the online credit application. It may seem like a pricey step but if the warning signs are there, it will be worth it.

Watch, Prepare, Check

Here we are going to look at a set of easy precautions that involve the steps the dealership should take within its four walls. First, if you don’t already do background checks now on staff, consider it soon. Anyone from sales to porters could get access to personal info that can be sold to someone who specializes in synthetic ID fraud.

Second, consider setting up video in the F&I office or a program that require a thumbprint as part of the application process. Buyers who are using a fake identity are much less likely to go through with the transaction if they are being watched or have to give a personal identifier that is unique and can’t be faked like a fingerprint.

Lastly, empower your F&I staff with a strong Red Flag program and training to help them spot this kind of fraud early. If your F&I product suppliers offer this as part of their compliance trainings, take advantage of it as soon as possible. Many F&I schools are still virtual for now during COVID-19 but as some start to opening back up for in person classes, see if they have this available.

Another point…finance companies are usually the ones to sound the alarm since the synthetic identity is not stolen from one individual as is the case with identity theft. One person alerts the authorities after seeing something on a credit report. This crime is much more difficult to uncover since there is no one person who would ever know that a piece of their personal info has been used.

Setting your store up to catch this fraud before it hits the bottom line is the key. COVID-19 has dealers who were not already immersed in online F&I back on their heels as it is but having to worry about fake buyers taking advantage of this new reality can cost dearly. No dealer can afford to lose a deal right now and every step that can be taken to protect the integrity of online deals is a valuable one.



Did you enjoy this article from Kristine Cain? Read other articles from her here.

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