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Published byClarissa Cobb Modified over 7 years ago
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Gil Van Over ACE Executive Director gvo3 President & Founder
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Compliance of Today Top Dealer Compliance Risks
Identity theft Credit application fraud Payment packing Discriminatory pricing
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Identity Theft Case Study
Red flags noted (unfortunately, not until after the first payment default) Out of state customer Never purchased from the dealership before Faxed DL No notary nor any other person verified ID $50,000 preowned vehicle: no test drive or inspection, no negotiations, no down payment, no trade, purchased every F&I product Credit app says $150,000/yr.
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Identity Theft Case Study
Here is customer’s address on Google Maps
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Identity Theft Case Study
Hint: Nikki was not governor when issued
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Identity Theft Case Study
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Best Practices Confirm required components are completed:
Safeguards and Red Flags Implement an out of area delivery policy Conduct onsite Safeguards audit Review Red Flags reports Find a sold transaction with incomplete status Drill down Treat Red Flags documentation like a subprime stip
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Credit Application Fraud
Just because lenders are focused on disparate impact and your portfolio does not mean that they have lost sight of the basics of lending and fraudulent practices a few unscrupulous dealers continue to employ to get deals financed.
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Suspicious Activity Report
1 Activity Report FRB: FR 2230 OMB No July 1, 2003 FDIC: 6710/06 OMB No Previous editions will not be accepted after December 31, 2003 OCC: 8010-9, OMB No OTS: 1601 OMB No ALWAYS COMPLETE ENTIRE REPORT NCUA: 2362 OMB No (see instructions) TREASURY: TD F OMB No This is a secret report that federally insured lenders are required to file against your dealership if it discovers any transaction contains elements of bank fraud. One North Carolina dealer had enough of these reports filed against it by a single lender that the lender’s regulator turned the case over to the FBI. The FBI conducted its own undercover sting operation and ended up successfully prosecuting the dealer for bank fraud.
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Falsified Credit Applications
Lender have sophisticated underwriting algorithms which take many proven customer factors into account in determining both the creditworthiness and the pricing for each transaction. They expect and require by agreement that you will accurately represent the customer’s credit application information to them so that they can make the appropriate decisions. Misrepresenting the customer’s income or housing expense or time on the job or time at residence is bank fraud and subject to both a buyback and the filing of a SAR.
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Fake POI You have an obligation to vet the stips you present to the lender as part of the deal. Do not accept the argument that because you submitted the stip and the lender bought the deal that you no longer have a potential buyback obligation. The collection supervisor who repossessed the vehicle and is looking to recover a deficiency balance will review the stips much harder than the booking clerk trying to book a deal every ten minutes. Here is an example of one of many website where customer’s can buy a fake paystub. It remains your obligation to vet the POI and other stips you receive and submit for accuracy.
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Fake POI You have an obligation to vet the stips you present to the lender as part of the deal. Do not accept the argument that because you submitted the stip and the lender bought the deal that you no longer have a potential buyback obligation. The collection supervisor who repossessed the vehicle and is looking to recover a deficiency balance will review the stips much harder than the booking clerk trying to book a deal every ten minutes. Here is an example of one of many website where customer’s can buy a fake paystub. It remains your obligation to vet the POI and other stips you receive and submit for accuracy.
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Fake POI One way to vet the POI is to look at the decimals. If they do not line up, it deserves a longer look and perhaps even a phone call to confirm employment. Another way is to confirm the Medicare and Social Security deductions for accuracy. The amount of the deduction is set by law. This one happens to be correct.
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Best Practices Require retention of source and electronic credit applications Periodically vet credit applications for differences Income, Housing, Time at job & address, Occupation Review POI for discrepancies Audit dealership PCs for payroll programs and websites Block known stips creation websites
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Payment Packing
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Best Practices Donate Sharpies to local day care center
Establish compliant, defensible desking policy Set default rate and rate matrix in desking system Lock down days to first payment Lock down number of payments per year Understand state max
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Discriminatory Pricing Pricing Guidelines Philosophy
Establish product pricing guidelines State max or rates if applicable Finance source limits Internal limits Industry standard Retail price Max profit Potential defense against: Discriminatory pricing Price gouging
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Product Pricing Guidelines
Rate 2.00% VSC Profit above F&I cost, use stairstep approach Maintenance Two times F&I cost Gap State max or finance source limit Credit Life, A&H State regulated Theft Majority of dealers use retail price, up to $499 Key, Dent, Tire Profit above F&I cost, $600 industry standard Bundled Profit above F&I cost, $600 per product up to $1,800 max profit GPS MSRP
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(312) 961-9065 www. ACEcert. org www. gvo3. com gil@ACEcert
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