2. Gil Van Over ACE Executive Director gvo3 President & Founder

3. Compliance of Today Top Dealer Compliance Risks
Identity theft
Credit application fraud
Payment packing
Discriminatory pricing

4. 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.

5. Identity Theft Case Study
Here is customer’s address on Google Maps

6. Identity Theft Case Study
Hint:
Nikki was not governor when issued

7. Identity Theft Case Study

8. 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

9. 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.

10. Suspicious Activity Report1
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.

11. 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.

12. 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.

13. 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.

14. 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.

15. 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

16. Payment Packing

17. 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

18. 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

19. 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

20. (312) 961-9065 www. ACEcert. org www. gvo3. com gil@ACEcert
(312)