Protecting Your Dealership Finance Department From Fraud and Misrepresentation
During the past year, automobile dealers and lenders have experienced a phenomenon of fraudulent information regarding loans originated. In various parts of the United States dealers are reporting the existence of "mills", generating and selling documents to customers and in some cases to dealership staff members. These outfits will produce bogus pay stubs and other information in order for non-qualifying customers to receive auto loans. The problem is not limited to sub-prime financing.

Loans containing false information regarding income, employment, equipment or down payments are subject to recourse by dealers. In the large scope of things these loans may subject dealers to other exposures especially when misrepresentation involves federal tax returns or W-2's. Generally these unscrupulous practices are not the work of dealsership but that of groups who manufacture documents. In cases where lenders have been sold or forced into reorganization the investors have researched defaulted loans and filed recourse against the selling dealer.
Dealers today must take proactive steps to eliminate misrepresentation and fraud. Committed dealers who set strict policies and guidelines for staff members and monitor their organization activity usually do not experience these problems.

Steps Dealers can take to protect against fraud:
  • Be involved with F&I departments.
  • DO NOT ACCEPT FAX COPIES OF STIPPS PERTAINING TO INCOME
  • Send original stipps to lenders
  • Train dealership processors to spot check loan packages for misrepresentation i.e. FICA amounts against total income, changes or white outs.
  • Have customer sign completed book out sheets to verify equipment, use we-owe forms for all equipment to be added.
  • Request from each lender that Sr. Management be notified of all suspected misrepresentation.
Dealerships today cannot afford the exposure this represents. Fraudulent documents can find their way into dealerships without a dealer's knowledge. Proactive dealers can stop these practices before it becomes a serious problem. Prime and sub-prime finance departments offer valuable profit centers for all dealerships, working together we can stop this practice and eliminate excessive and adverse problems, costly for both dealer and lender.