Randy Henrick likes a cartoon of a pooch, sitting in front of a computer screen, telling a canine pal, “On the Internet, no one knows you’re a dog.”
There are no known cases of dogs using the Internet to procure cars illegally. But plenty of times human identity thieves do just that.
“On the Internet, no one knows who you are, and the likelihood of you being someone other than who you say you are increases dramatically,” says Henrick, associate general counsel forInc., which links auto dealers to lenders.
Part of his job is to help dealerships make sure they don’t unwittingly finance a vehicle to an identity thief.
He also is busy getting dealers up to speed on the federal government’s impending Red-Flags regulations intended to spot and stop ID thievery. That can be tough because of the sheer magnitude of the crime.
“Last year, identity theft passed illegal drug trafficking for the first time as the most lucrative criminal business,” Henrick says during awebinar.
It’s a $1 trillion a year activity, says the FBI. In the U.S., an estimated 15 million people are victimized. ID fraud occurs much more online than in person.
Although credit-card identity theft is down, the automotive version of it is up, Henrick says. “One reason is that it is very profitable. Blame the low-trading dollar. Stealing and exporting vehicles abroad is a very profitable activity, and it’s not hard to do.”
Online and other “buyer-not-present” transactions pose the biggest risk of identity theft to dealerships, he says. “The problem is very real.”
He cites the case of a Georgia dealer who sold and financed a $50,000to an identity thief and sold the contract to a bank.
Because of a series of circumstances and then civil court rulings that didn’t go his way, the dealer spent nearly $60,000 to repurchase the contract, could not recover the vehicle and was stuck with a stack of legal bills.
The dealer was out about $150,000 from just that one deal gone terrible. In such crimes involving autos and auto loans, “the dealer is always the loser,” Henrick says.
Identity thieves typically come in two varieties. The “traditional” one takes over another person’s identity. The “synthetic” ID thief uses one person’s Social Security number, another person’s date of birth and someone else’s name.
Synthetic ID thieves are becoming more prevalent and harder to stop. They often end up with a thin credit file and a credit report that looks like it is for a 20-something person.
“If you see that in an older person, ask why they only recently started establishing credit,” Henrick says. “Listen carefully to the answer.”
He advises dealers to treat Internet customers as guilty until proven innocent.
That means examining identification documents, checking credit reports for odd activities and asking knowledge-based authentication questions (“Who was your last employer?” “What financial institution financed your last auto loan?)
He also stresses using an electronic identity-verification service. Those run proffered names against a slew of databases, looking for fraudulent matches or suspicious information. “I cannot imagine an effective Red-Flags program without using an identity-verification service,” Henrick says.
How can dealerships verify the identity of people using the Internet to buy cars? “Do what you do for in-store customers, but be more thorough and allow less leeway for inconsistencies,” he says.
Ask the person to send by overnight delivery color copies of a driver’s license, photo ID and two original utility bills. Still, Henrick warns against relying too much on photo IDs as well as credit reports.
Social Security numbers are atop his red-flag pole. “Remember this important fact. Every identity thief – every single one – will have a phony or illegitimate Social Security number.”
Here is a question to ask of auto-loan applicants: “What state did you live in when you obtained a Social Security number?”
Why is that significant? Because a Social Security number’s first three digits indicate what state an applicant lived in at the time of issuance. The Social Security Admin.’s website lists which numbers go with which states.
Henrick recommends getting a copy and keeping it at hand. If someone claims his Social Security number was issued in California, and the number indicates New York, a dealership should raise the red flag to full mast.
“You would be surprised how many identity thieves don’t bother to learn the state assigned to their stolen Social Security numbers,” Henrick says. “Dealers have told me they have caught a number of identity thieves just by asking this simple question.”
He gives other tips for outsmarting the bad guys illicitly using the Internet.
- On the phone, quiz them about inconsistent credit-report information, especially new patterns of activity. “People don’t suddenly become spendthrifts.”
- Listen for nervousness, long pauses, stammering and answering a question with a question. As Yogi Berra once said, “You can hear a lot just by listening.”
- Ask for a cash down payment. ID thieves like credit deals and dislike parting with cash.
- Get a banking reference and call the bank’s main number, not the number the customer provides.
- +Even if you don’t know the answers, ask personal questions along the lines of where someone went to grade school or what is his or her mother’s birthday and place of birth. The person on the other end may think you know the answers. “These kinds of questions can really freak out an identity thief.”
Henrick advises dealership staffers to keep talking and listening until they are comfortable the person they are dealing with is legitimate.
“You need to get comfortable or seek additional information until you get comfortable one way or another.”