New tools can improve dealership verification methods

As additional tools emerge for fraudsters to conceal their identities, software companies also are devising tools to catch these scammers before a vehicle is sent to a phony customer. The best defense against fraudulent auto originations is a robust identity-verification tool, fraud experts say, but access and dealership desire may pose barriers.

GIACT Systems provides enrollment and account-verification software that works to mitigate fraud for a variety of industries. David Barnhardt, chief experience officer, said fraudsters know a dealership's primary focus is getting customers behind the wheel as quickly and seamlessly as possible.

Most dealerships make a copy of a customer's driver's license before a test drive, he said. But "the kicker is, what do you do with it? Can you really verify who that person is?"

A valid driver's license often is not enough to confirm a person's identity, particularly if a prospective buyer is using a perfect replica of someone else's, Barnhardt said. The more identifying data dealerships have, the quicker they can spot a fake applicant.

For example, checking an email and a mobile phone number through a system such as GIACT's could unearth suspicious information. If those things have been associated with an identity for only a handful of days, Barnhardt said it should be enough to tip off a dealership that a person could be using a fake identity.

"That's two very ... small pieces of information, but they're very compelling in today's identity fraud market," Barnhardt said. "These things can burn a dealer."

Truepic works with automakers and finance and insurance product companies to verify that vehicle images submitted by dealership service departments as part of service orders and warranty claims aren't fraudulent.

This process also can be applied to verifying customer documents. Truepic, which builds identity- and image-verification technology, is working to pinpoint exactly when and where a customer is sending information to businesses. Craig Stack, the company's co-founder and president, said dealerships need to accept that stopping fraudsters is going to take more than scanning a license.

When a customer uploads images of documents such as a driver's license, Truepic's software runs the image through 22 fraud-detection tests. They include comparing the photo against online images and pulling data from the cellphone that took the image to make sure the person is who they claim to be.

Truepic does not have any dealership relationships but works with several large banks and auto lenders. It wouldn't disclose pricing, saying that depends on customization and volume of use for identity verification. The company did note that, for the automotive companies that use its Vision platform to validate vehicle images, pricing generally falls between $9 and $18 per inspection.

Frank McKenna, chief fraud strategist at fraud-detection specialist Point Predictive, said tools such as Truepic can help dealerships but may be too cost-intensive for single-point stores. Auto lenders have more resources for fraud-detection tools than the dealerships they serve. That's why he said dealerships should proceed with caution when a lender flags applications as potentially containing false information.

Lenders "can afford software the dealerships can't, so dealerships should take advantage of it," McKenna said.

Not all solutions have to be digital. Modern Toyota of Winston-Salem, N.C., sends employees who are registered notaries to deliver vehicles and finalize remote transactions. General Manager Jim Butler notes the practice is unusual but says the best way to prevent fraud is to finalize as much of the process as possible before employees drive out to meet the buyers.

Certain software systems can help dealerships endorse documents, but Butler swears by his employees' ability to verify customer identities.

"All the technology in the world will not protect you as much as an employee that knows what they're doing and will do it at a highly professionalized level," he said.

Taking additional steps to verify identities doesn't have to hinder a sale, though Butler said he is comfortable adding a few minutes to the process to ensure the sale is legitimate.

"We do slow down the delivery process to make sure we're doing our due diligence," Butler said. "The key to that piece is to do as much as you can in advance before the trip is initiated."