Guest commentary: Buying a car should be like boarding a plane

Stick to processes and best practices to verify buyers’ identity when selling a car to avoid falling victim to fraud.

Imagine you walk into an airport for a flight. Can you just walk up to the gate, offer some money and hop on a plane? Absolutely not.

Airports never skip a step in their process. You can have TSA PreCheck and go through security faster, but you never skip the line altogether. Your license and boarding pass will be checked every single time.

You would think car dealerships would be just as rigorous in verifying people are who they say they are, like airports do.

Having helped dealers for 25 years, I can confidently tell you this often is not the case. When airports get busy and the security line backs up, they don’t skip steps. Dealerships are sometimes different. The busier they become, the more frequent some of the steps of a dealership’s “best practices” and ideal process are skipped at the worst times.

Considering this, it’s not surprising the auto industry’s prevention and detection of fraud is struggling. A Point Predictive survey reported a $400 million increase in fraud exposure to auto lenders last year.

Within our customer database at Informativ, we identified and flagged more than 5,300 fake IDs in 2023, resulting in more than $100 million in savings for dealers and lenders. An Equifax study reported, in the automotive sector, fraudulent applications increased by 28 percent in the past year. Clearly, fraud is rising.

In fact, fraudsters’ success rates and technological improvements are making it harder for dealerships to detect fraud without technology.

“You really don’t realize how many fraud issues you have until you have a technology in place,” said Jesse Cordaway, the corporate variable operations director at Parks Automotive Group,an Informativ client that has 13 locations in North Carolina, South Carolina and Virginia.

“Just two weeks ago, we had a customer in the dealership, and to us the driver’s license was perfect,” Cordaway said. “Everything on the driver’s license was accurate — driver’s license number, date of birth, address, his blood type, you name it. And the only thing that was wrong was the picture. It wasn’t him.”

The dealership ran the driver’s license through our compliance app and detected the fraud before it delivered a $100,000-plus Dodge Challenger Demon 170 to the customer.

New challenges

Synthetic fraud — the cobbling together of valid identity points to construct a borrower that doesn’t exist and never had their identity “stolen” — is especially growing.

TransUnion found that auto lenders are among the most targeted U.S. lenders, with total synthetic identity exposure (i.e. potential losses) reaching $1.8 billion in the first half of 2023 compared with $1.3 billion during the same period in 2022 — a 38 percent increase.

Darin Larsen, managing partner, credit services at Informativ, attributes the increase to “so much of our legitimate personal data” being accessible “to fraudsters on places like the dark web.”

“The massive amounts of data being entered and collected online is making synthetic fraud easier to perpetrate and harder to prevent,” he said.

And, according to Larsen, the momentum is not in our favor: “Most dealers haven’t had synthetic fraud on their radar until more recently because it was a relatively new form of identity theft,” he said. “The bad guys are leading, and the good guys are chasing.”

Way forward

That’s not to say there’s nothing we can do. We know fraudsters’ typical behavior, and we know how dealers can work to detect and prevent fraud.

Fraudsters typically strike when it’s busiest at your dealership, and they expedite the process by not haggling over price and saying “yes” to every add-on offered. They also may ask for remote delivery at a generic location such as an office building or coffee shop.

The most effective way dealers combat fraud is by establishing consistent, repeatable and enforceable processes that can be followed in the showroom whether there is one customer or 50.

Consistent, repeatable processes are needed to control four entry points.

1. The meet-and-greet: salespeople directly interacting with customers face to face.

2. Consumer text/phone: salespeople gathering data via a customer’s mobile device.

3. Synthetic collection: pulling a credit report or other method to vet personal identifiable information.

4. Remote: the reception of customer information/communication and product delivery through any method other than in-person.

If you have reliable fraud detection technology supporting your process, it will catch fraud starting with the first two cases. If you don’t have fraud detection technology, it’s harder to catch until the third entry point; you’re relying on your individual salespeople to remember best practices and process.

Invest in technology, processes and people who can help build and enforce behaviors that stop fraud more effectively and earlier in the sales process. Buying a car should be like boarding a plane. Never let anyone skip a step or jump the line.