Expert Insights: Fraud and Privacy Risk with Digital Finance
The transition to digital transactions accelerated dramatically during the pandemic—a necessity for dealerships if they were to continue to conduct business in the absence of in-person interactions. The convenience and positive customer response, however, came at the expense of a greater susceptibility to fraud. To help dealerships confront and combat ID theft and other instances of fraud, Automotive News Canada spokesperson with Gino Caputo, Senior Vice President & Head, TD Auto Finance (Canada), who offered advice on the various innovations and best practices—perhaps none better than: If something seems wrong, it probably is.
Q: It’s safe to say that since the pandemic, the automotive industry has changed for dealers and manufacturers. Have there been changes with the amount of fraud and types of fraud taking place at dealerships?
Gino Caputo: Absolutely. Across the industry, we’ve seen increases in both the frequency and types of fraud over the last few years. Throughout the pandemic, fraudsters took advantage of safety protocols that reduced in-person transactions and found new ways to target auto dealerships.
It wasn’t uncommon to have purchases from outside a dealership’s geographical area, which opened up more opportunities for straw purchases. We’ve seen improvements in ID theft on applications from single and multiple applicants, as well as cross-province ID theft applications.
Q: What are the most common fraud schemes you’ve seen, and what are the most effective ways to prevent or discourage fraud?
Caputo: In addition to the ID theft I mentioned, check fraud is a very real threat. We’ve seen increased occurrences of counterfeit or altered checks compromising our customers’ accounts.
Customers can help to protect themselves by placing alerts on their credit bureaus and safeguarding their personal identification and information. Dealerships can play a critical role in protecting customers and themselves by implementing and consistently following accounting and fraud prevention best practices, such as daily reconciliations of account transactions to enable timely identification of fraudulent checks by customers and subsequent reporting to the bank. Other best practices include transitioning to electronic payments to decrease exposure of account details and enrolling in a check fraud protection service that manages check clearing through accounts.
More broadly, for any type of fraud scheme, my advice to dealers is to trust your gut. If something seems off, it probably is. Digital advances in selling are a great step forward for our industry, but they come with checks and balances to protect us all. If a customer doesn’t want to meet in person, that’s a potential red flag. Know your customer, know your province’s requirements, and know the resources that are available to you—including your team here at TD Auto Finance, who are here to support you.
