Credit card fraud is on the rise and thieves have set their sights on car dealerships. From car parts to whole vehicles, dealerships have become victim to some huge credit card fraud scams. Both credit fraud and identity theft have become serious areas of exposure and loss for car dealerships nationwide.
In December, a caller from Chicago ordered nearly $20,000 worth of parts from a Chevrolet dealership in Salt Lake City. The purchase was charged to a credit card. It should be noted that the parts purchased would have been readily available in Chicago and this should have been a tip-off that the order was fraudulent. However, the credit transaction received an Authorization Code, so the parts were shipped the same day.
Keep in mind that an Authorization Code really has no meaning other than at that moment in time, the card was not reported stolen, the account was in good standing and the purchase was within the credit limit of the card. An Authorization Code does not guarantee that a transaction was actually valid as so many merchants falsely believe. Needless to say, the dealership was burned in the transaction. The buyer was a thief, the credit card was stolen and by the time the owner of the credit card got his statement and disputed the charge, the parts and the crook were long gone. This illustrates the need to verify the identity of purchasers using a credit card regardless of how the order arrives.
Jeanne Hankerson, a vice president of Federated Insurance Cos. says that insurance claims arising from fraud typically range from $10,000 to $100,000. Dealers and their insurers say that scams have recently escalated. Overseas theft rings are making sizable parts orders to dealerships via e-mail. Dealerships should pay particular attention to orders from Nigeria and Singapore. Thieves contact dealerships by e-mail using legitimate-sounding business names. A Dodge dealership in Illinois received an order for 500 spark plugs from Lagos, Nigeria. The Parts Department did not fill the order after being previously burned for several thousand dollars in a similar scam.
Protecting Your Dealership
There are many things a dealership can do to protect themselves from becoming a victim. At the very least, verify with the issuing bank that the address where the credit card statement is mailed to matches what your customer says it is. You can do this by calling your Merchant Hotline and reporting to the answering operator that your call is a “Code 10” call. This means that you suspect the transaction is fraudulent. A Code 10 will initiate calls to the issuing bank and ultimately the true cardholder to ask if the purchase is legitimate.
If the order is placed by phone or email, you can ask the purchaser to send you a copy of the credit card and their Driver’s License. Remember, you must destroy this information once verified to remain in compliance with PCI regulations. You cannot store a credit card in any form that is not encrypted. The bottom line is, prove who the person is that you are doing business with before releasing anything.