Background

Back in May, Sergeant Darren Schlosser, with the Houston Police Department Auto Theft Division — Vehicle Fraud Unit, conducted a webinar on “Vehicle Finance Fraud, aka How to Steal a Car with a Pen.” As the webinar could not be recorded, a summary of Sergeant Schlosser’s information is provided below.

Types of Vehicle Fraud

Vehicle financial fraud is estimated to cost the U.S. approximately $8.3 billion annually. The following are a number of ways that fraud is committed:

• Document fraud occurs when a person uses their real name, DOB, driver’s license or SSN but produces fraudulent documents to increase their creditworthiness, such as paycheck stubs, utility bills, bank statements and insurance cards, because they are unable to qualify for a vehicle loan on their own merit. Fraudulent documents are used to inflate income levels and create a false job history and other financial information.
• Identity theft occurs when one person steals the personal identifying information (PII) of another in order to steal their credit. This act entails the unauthorized use of another person’s name and PII, such as DOB, driver’s license number and SSN, to open new accounts for committing auto theft.
• Credit Privacy Number (CPN) resembles a nine-digit SSN. A CPN is typically obtained under the belief that the person is attempting to protect their SSN or rebuild their credit history. A CPN can be acquired through websites for a fee or created by an individual using a child’s stolen SSN. The use of a CPN in lieu of an SSN is fraudulent.
• Synthetic identity occurs when a person uses a fraudulent SSN in conjunction with either a Full Synthetic Identity or a Hybrid Synthetic Identity. This accounted for up to 20% of credit losses or approximately $6 billion in 2023.

Fully Synthetic Identity

An individual with a fully synthetic identity:

• Creates a false name, DOB, DL and obtains a CPN.
• Obtains a credit card under a false name and makes purchases and payments.
• Builds a fraudulent profile to an 800+ Beacon score.
• Creates fraudulent documents to support the fake name, such as employment records, paycheck stubs, bank records and utility bills.
• Obtains a burner cell phone for fraudulent ID use and employment information.
• Submits online credit applications to limit face-to-face interaction.
• Enters a dealership only after credit approval.

Hybrid Synthetic Identity

An individual with a hybrid synthetic identity:

• Uses their own identifiers such as name, DOB and DL.
• Uses a “credit repair agency” to obtain a CPN.
• Uses some fraudulent documents such as paycheck stubs, insurance cards and utility bills.
• May be detected when the credit report has only recent activity.

Problems Identifying Synthetic Identities

Synthetic identities are often undetected by finance companies and seldom reported to law enforcement for a few reasons:

• It is difficult to verify because no person exists to be a complainant, unlike identity theft.
• It can be a “first payment default” or a few payments made in order to slow discovery.
• Finance companies are reluctant to provide information due to “privacy laws.”

Examples of Fraud

Artificial Pay-off

“X” makes a payment on their vehicle. “X” goes to trade in their vehicle and the dealership contacts the lender for a payoff. Dealership reflects the pay-off on the new purchase and shows the difference on the new retail installment contract. The dealership is unable to obtain the title on the trade because the lienholder informs the dealership that “X”’s payment bounced, and in order to obtain the title, the dealership must pay an additional amount to cover the NSF payment. Oftentimes, a large lump-sum amount is sent to the lender prior to trading in the vehicle so that the payoff appears to be much less.

VIN Swap and VIN Clone

A VIN Swap or VIN Clone allows an unsuspecting buyer to purchase a stolen vehicle. This happens when the VIN of a wrecked vehicle is used on a stolen vehicle. A stolen vehicle’s VIN is changed to reflect the VIN of a similar model, make and color. It is likely a vehicle sold in another country and not easily recognized because the VIN conforms to a true vehicle. U.S. registrations do not communicate with other countries, such as Canada or Mexico.

Finance Fraud Trends

• Suspects are both male and female.
• Suspects make multiple vehicle purchases in a short time period.
• Suspects use fake DL and ID cards.
• Parents may use their children’s identifiers.
• Internet purchases are made with cars being shipped to the buyer.

Characteristics and Clues to Watch For

• Comes to the dealership near closing time, on weekends or when the dealership is very busy.
• Fast and hurried transactions.
• If texting/calling during the buying process, look for a Bluetooth device. They may be receiving instructions from a third party.
• Little to no negotiation on the vehicle price.
• Willing to purchase any/all F&I products.
• Multiple vehicle purchases in a short period of time.
• Temporary or paper ID documents.
• Little or no down payment, less than $2,500.
• Paperwork to be sent overnight to be signed.
• Vehicle to be shipped out of state.
• Fraudulent information on credit application.
• Fictitious addresses.
• Fictitious proof of employment, like fictitious pay stubs.
• Fictitious proof of residency, like fictitious utility bills.
• Fictitious proof of insurance or immediately canceling the policy upon purchase.

What To Do To Deter Vehicle Finance Fraud

• Check the identification. Invest in an identification system such as a driver’s license ID system. If a transaction is remote, obtain a color copy of the ID and ask for a “selfie” with the ID for physical verification. Prior to delivery, require a taped video conference to review the contract.
• Gather the proper documents. Look for abnormalities in documents. Check font size and different types between the name and the standard print. Look carefully at the background in the driver’s license photo.
• Look beyond the documents. Verify cell numbers and email addresses. Have the salesperson send a text and email to the purchaser, which requires a response that is read back to the salesperson.REMEMBER: Do not send a text without obtaining consent from the receiver. It is preferable to obtain consent to contact in writing so there is no misunderstanding. (Telephone Consumer Protection Act).
• Research the purchaser. Search the internet for social media accounts using their name and cell phone number. Check the home and employer’s business addresses on available maps. If the address is an apartment complex, obtain the complex’s listed number and verify. Ask yourself, does the income reflect the job title?NOTE: If the provided information does not coincide with the internet, it does not necessarily mean the information is fraudulent; however, it requires further investigation.

Dealership Security Precautions

• Use surveillance cameras and equipment that record and capture details.
• Scan documents in color, especially IDs.
• Keep documents with PII secure and not left unattended.REMEMBER: The FTC “Safeguards” Rule requires the dealership to ensure the security and confidentiality of customer information, including protecting the dealership’s systems against anticipated threats or hazards and unauthorized access or use of customer information. Limit and monitor who can access a customer’s personal information and encrypt information.
• Vehicle keys/fobs should be logged in and out by each employee in order to track who was in the vehicle and when. Use a tamper-resistant key ring to avoid an easy swap of a traditional ring, as most key fobs are designed to release a hidden physical key inside while still attached to the ring. A criminal can easily replace the keyless fob with a “dummy” fob. Avoid putting both keys on the same key ring. If one fob is swapped, the other fob will still work and you’ll know the swap occurred. Require each salesperson to physically push the lock and unlock buttons after each viewing and before the customer leaves. This will ensure the key/fobs are operational and may identify any suspects before they leave the dealership. If you suspect a key/fob swap has occurred, immediately put the vehicle in a secured location and wipe the memory from the previous keys/fobs. The typical MO for the key/fob swap is to come back either late at night or early in the morning to retrieve the vehicle.
• Secure the most valuable vehicles so that they cannot be easily driven away.
• Create a document with a thumbprint section. Utilize a digital fingerprint capture device, ensuring the images are crisp and the ridges are prominent for identity theft precaution.
• Record the finance process.

How To Respond to Fraud

If you know a person inside the dealership is presenting fraudulent information:

1. Call the responding police agency and tell them the suspect is still on-site and to elevate the call to an “in-progress” status.
2. Obtain photographs of the suspects, their vehicle and license plate.
3. Try to stall the person until the police arrive.

If the fraud is discovered after the purchase:

1. Make a folder with clear copies of the purchase documents.
2. Make a copy of all correspondence.
3. Type a transaction summary, including dates, times and all employees involved.
4. Make a police report ASAP.
5. Follow up with the assigned investigator.