A flood of vehicles obtained fraudulently and shipped to metro Chicago has prompted the Chicago Police Department this summer to warn dealers nationwide to exercise "extraordinary diligence" in verifying the identity of online customers.
The police department said it was fielding at least three requests a week to investigate and recover the vehicles shipped to the area, which includes the city of Chicago, its suburbs and northwest Indiana. It asked the National Automobile Dealers Association and other industry groups to distribute a warning to dealers about the uptick in fraudulently obtained vehicles that it described as an epidemic -- one that could have been prevented at the dealership.
"In every incident that we have investigated, there are several red flags that the dealership should have caught prior to shipping the vehicle," the department's warning reads.
The scope of the problem is difficult to determine given the multijurisdictional layers to national fraud rings, said Sgt. Keith Blair, commanding officer of the department's auto theft unit. Chicago police may not be notified if a vehicle is recovered outside the city or if a vehicle is reported stolen only in the jurisdiction from where it was shipped.
He declined to estimate how many vehicles were involved but did note that the problem has been going on for at least 18 months. A rate of three reports per week for that period would equate to complaints involving at least 230vehicles.
Typically valued at $50,000 or more, the vehicles, from brands such as Maserati, Mercedes-Benz and Infiniti, have been shipped in from such states as Utah, Florida, Texas, Delaware and Pennsylvania. The department recovers about half the cars it is notified about, Blair said. It's not clear whether arrests have been made.
Blair said dealers should be checking customer identity information on Google and social media to spot inconsistencies. "There's a lot of things that, if I were a dealer, I would ask about, certainly before shipping a $50,000 vehicle."
He added, "Is it better to lose a deal or give away a car that we have to chase down later?"
How it works
In most cases the department has seen, the credit application and other paperwork were either filled out online or sent to the dealership via FedEx. The credit application was initially approved, and the vehicle was shipped. But upon further review of the credit application, inconsistencies were identified, and credit was declined.
But the fraudulent buyer already had requested the vehicle be sent to an address in the Chicago area, often a vacant building.
Fraudsters involved in the scam create phony email accounts in someone else's name as well as a fake driver's license with the identity theft victim's information, police said. They use untraceable phone numbers via applications such as Google Voice.
To avoid being scammed, the department says dealerships should thoroughly vet online loan applications and other paperwork and institute a waiting period before shipping vehicles out of state.
By warning dealers nationwide, the Chicago department aims to cut down on the number of scams, Blair said.
"If I can take some of that off of our plate by being proactive and reducing the number of cars that are shipped here, it definitely is helpful to myself, my team and other officers who may have to locate these vehicles," he said.
Not just Chicago
Blair noted it's not just a Chicago problem.
"It's happening in Atlanta, St. Louis and, I'm sure, several areas throughout the country," he said. "Unfortunately, it's happening everywhere. It's a pretty serious problem across the country. We've seen an increase of it in the city."
When it distributed the warning to its members, NADA added a note reminding dealers that the Federal Trade Commission's Red Flags Rule makes certain requirements of dealerships that offer or maintain consumer credit, including retail installment sale contracts and vehicle leases, as well as dealerships that offer business credit where a reasonably foreseeable risk of identity theft exists.
Those dealerships must maintain a written identity theft prevention program that: identifies relevant red flags that indicate possible identity theft; contains reasonable procedures to detect and respond to those red flags; and is updated periodically to reflect new identity theft risks.
The Illinois Automobile Dealers Association told Automotive News it has not heard from any Illinois dealers or consumers affected by the thefts.
"We would like to remind our dealers to make sure they have a red flags identity theft program in place, and follow the program, so that they do not become the next victim of identity theft," Larry Doll, the association's legal counsel, said in an email.
