Steering Auto Rentals and Dealerships Away from Identity Fraud
In a bustling world of vehicle rentals and sales, identity verification is a crucial cog in the wheel. It’s a key player in ensuring smooth transactions and safeguarding against fraud. Car dealers in the US and Canada alike are increasingly recognizing its importance. They are integrating robust identity verification systems into their operations. This move is not just about security, but also about enhancing customer experience.
Renting a car or taking a test drive should be a seamless process. Identity verification can speed up these processes, reducing wait times and frustration. It’s about striking a balance between thorough checks and customer convenience.
But the benefits don’t stop there. For dealerships, identity verification can minimize financial loss, prevent unauthorized vehicle use, and even reduce insurance premiums. It’s a win-win situation for both dealerships and customers.
In this article, we delve into the world of identity verification in the North American car dealership and rental industry. We will explore how it’s revolutionizing the renting or selling process and minimizing loss.
The Growing Threat of Identity Fraud
Auto theft claims in Ontario, Canada, increased by 329% between 2018 and 2023, indicating an alarming trend in the automotive industry. While synthetic identity fraud rates in most industries have remained stable or even decreased, the auto industry is a notable exception, according to TransUnion. In the United States, the automotive loan industry faces a high risk, with synthetic identity fraud increasing by 38% from 2022 to 2023, resulting in $1.8 billion in losses – a figure that surpasses sectors such as bank and retail credit cards, as well as unsecured personal loans.
These statistics highlight the growing risk of identity fraud in the automotive sector.
We spoke to Miruna Bogles, who attended an international conference on travel document fraud and documents of trafficked stolen vehicles in Romania. We asked about a major issue that sparked her interest.
She explained, “There are many fraud practices in stealing cars; for example, they “clone” it in other countries by changing the license plate and Vehicle Information Number (VIN). This is to disguise stolen vehicles and sell them as legitimate, making it harder for authorities to trace their origin.
The speakers emphasized that the first step in combating this type of fraud is accurately establishing an individual’s true identity. They highlighted the importance of both understanding how to scrutinize documents manually and embracing new tools and technologies—such as document databases or automated forgery detection software—to support informed decisions on document authenticity.”
Understanding Their Techniques: How the Fraud Was Done
1. Test drive fraud
Thieves use fake IDs to pose as potential buyers and take a car for a test drive. However, they never return, forcing the dealership to bear the cost of the stolen vehicle.
2. Auto loans
A fraudster will use their synthetic identity to apply for an auto loan from a dealership. If the dealership F&I department overlooks the fraud, they will approve the loan, and the criminal will get the vehicle. Once approved, they drive away with the vehicle and never make payments. Because the personal information is completely fabricated, recovering the vehicle and locating the fraudster is nearly impossible.
3. Trade-in scam
Some fraudsters target trade-in processes by using fake identities to “sell” stolen vehicles to dealerships. They present fake identification documents and personal information, allowing them to walk away with cash or a new vehicle while the dealership is left with a stolen car. This scam poses a significant risk to dealerships that accept trade-ins without thorough identity and vehicle verification checks.
4. Car rental fraud
Car rental fraud occurs when criminals rent vehicles using fake or stolen IDs, often with the intent of stealing the vehicle or using it illegally like smuggling or robbery. After providing forged identification, they drive away with the vehicle and never return it. Because the rental company is using fraudulent documentation, it becomes difficult to locate or recover the stolen vehicle, resulting in significant financial losses. This type of fraud is particularly prevalent in high-demand rental markets, where criminals can take advantage of the rental process’s speed and convenience.
The Consequences of Identity Fraud
Fraud and theft pose serious threats to car dealerships. These issues can lead to significant financial losses and damage to reputation. Stolen vehicles represent not just monetary loss, but also operational setbacks, impacting finances, inventory, and operations.
Financial and Inventory Loss
Fraudsters often use stolen or synthetic identities to take out car loans, arrange test drives, and rent cars, never intending to make payments or return the vehicles. This leads to direct financial losses, as dealerships and rental companies may be responsible for unpaid loans or chargebacks.
Stolen vehicles are nearly impossible to recover as they are often dismantled and sold as unidentifiable parts or even shipped off to territories overseas where they can be sold for a premium. Even recovered cars may lose value or be harder to resell.
Additionally, dealers may face higher insurance premiums and regulatory scrutiny due to repeated fraud incidents.
Strained Relationships with Lenders
A major risk of inadequate ID verification is the strain it could place on relationships with lenders. Lenders rely on dealerships to conduct thorough identity checks during loan applications, and if a dealership falls short in this aspect, lenders may become hesitant to collaborate or even consider terminating the partnership altogether.
How Identity Verification Protects Car Dealers & Rental Companies
The risk of fraud emphasizes the critical need for solid identity verification. Criminals frequently use advanced methods to forge documents, making it critical to detect these forgeries before damage happens. Identity verification software validates document authenticity by examining security features and cross-referencing data. For example, they compare details on the data page to those in the MRZ and even check data within the RFID chip to ensure a thorough and secure verification process.
Identity verification, whether done manually or automatically, should be seamless to avoid disrupting the customer experience or resulting in abandoned sales. Efficient verification solutions not only prevent fraud, but also streamline customer onboarding. For example, optical character recognition (OCR) reduces data entry errors and speeds up processing, whereas biometric technology such as facial verification ensures that the person presenting the ID matches the document. These tools improve security and contribute to a pleasant experience for both businesses and customers.
Secure identity checks are pivotal for building customer trust, retention, and reputation. When customers feel secure, they are more likely to choose the same dealer again. Trust in the process encourages positive word-of-mouth.
Identity verification ensures only legitimate users can rent or buy vehicles. This prevents unauthorized access and misuse. Customers also appreciate organizations that prioritize their safety and data privacy. A trustworthy rental company or dealership fosters loyalty and long-term relationships.
Experience Keesing’s Solutions
If you need a reliable and accurate identity verification solution, Keesing Technologies has you covered. Our automated tool, Keesing AuthentiScan, provides seamless verification, whereas Keesing DocumentChecker supports manual checks. Contact us to schedule a demo and learn how our solutions can help protect your vehicle dealership or rental business from fraud.
