When thieves pretend they're someone else to commit fraud, the person whose identity is stolen isn't the only one who suffers. Just ask your local auto dealer.
Florida Automobile Dealers Association President Ted Smith said one of his members was almost swindled by a man who walked in and tried to buy a car using the identity of his own father. "If the dealer hadn't paid as close attention to his ID, it would have been easy to mistake John the third for John the second," Smith said.
Then there was the man who used a stolen identity to buy a $60,000 Cadillac Escalade. "A man last year found out he bought an Escalade, only he hadn't," said J.R. Wilson, vice president of Suwanee, Ga.-based PatriotDealer.com, an Internet-based service that helps dealerships comply with the Patriot Act. "He contacts his insurance company and they tell him the vehicle has been added to his insurance. He's able to iron everything out, but the dealer is still out a car and $60,000."
The Patriot Act -- enacted in response to the 9-11 attacks -- requires, among other things, that businesses and other organizations take greater care when signing customer contracts, making sure people are who they say they are and that they're not using fake IDs to commit terrorism and other crimes. But as concern over identity theft grows, Wilson said banks and financing companies are using the law to hold dealerships accountable for losses.
"A lot of dealers don't realize the banks are holding them responsible," he said. "It used to be they only had to show due diligence and the bank would absorb the cost. Now the dealer is expected to be the eyes and ears and catch identity thieves in the act."
Wilson said one dealership in South Carolina got hit 11 times with this kind of fraud, much of it perpetrated over the Internet. "The dealership found out before the bank did because that one guy called them and said, 'You say I bought a car but I never bought it.' A lot of times fraudsters do this over the Internet or they walk in the door. They have the technology to make all these fake documents."
But now dealerships have a weapon to defend themselves, Wilson said. Last spring PatriotDealer.com started deploying software for a new service called SmartID, a version of Edison, N.J.-based StrikeForce Technologies' VerifyID tool.
Using the technology, the company expects to run 20,000 identity checks a month for dealers by late summer. Wilson said SmartID is integrated into PatriotDealer.com's overall service package, which includes the Patriot Act and OFAC (Office of Foreign Assets Control) compliance service and other identity fraud prevention tools tailored to the auto industry.
How it works
Most ID-verification systems take a person's address, Social Security number and confirm they exist. But they don't take the next step to ensure the guy sitting in the dealership is actually the guy who is verified, Wilson said.
The StrikeForce technology takes that extra step by asking the customer a series of multiple-choice questions about previous addresses, credit history and previous cars -- information only the real user would know. It asks, among other things:
- What color was the car you drove in '97?
- What is the name of the bank that financed your first home?
- What is your wife's maiden name?
- In what state was your Social Security number issued?
- Of the addresses listed below, which one are you not associated with?
- Of the people listed below, who are you associated with?
- How much is your monthly car note?
"Our product is known as a scrub," said Theodore Svoronos, StrikeForce's VP of e-commerce solutions. "Someone has to plug in all their information. Then VerifyID goes back to the database and comes back with a range of questions the person must correctly answer. There are non-financial and financial questions. If you answer all the questions, you pass the scrub and you are who you say you are."
A growing interest
Svoronos offered a statistic to illustrate how auto dealers are getting hit by ID thieves: "One vehicle worth $45,000 or better is stolen once every six weeks from a dealership through online phone schemes," he said. "There are also people who will pose as someone face-to-face, with an entire wallet built on someone else's identity. They'll have the driver's license, a credit card and other pieces of ID."
So far, Svoronos said, at least 22 dealerships across the country are using SmartID. Wilson said "a couple handfuls" of his clients started using the tool when it was launched, and close to 100 were scheduled to start using it by Aug. 1.
It typically costs dealers about $3 to add SmartID to their service package. "It's a small price to pay when the alternative is a $5,000 deductible and a stolen car," Wilson said. "One dealer told me, 'If I had this a year ago I could have saved three cars.'"
Using the tool adds time and paperwork to the financing process, Smith said. But for the 900 or so dealerships in his association, he said it's worth the extra effort.
"This can actually help business because the dealer is showing the customer that strong measures are being taken to protect their personal information," he said. "When you have a reputation of handling other peoples' information responsibly, more people are inclined to do business with you."