Loss prevention advisory - “best practices” information.

FALSE PRETENSE

False Pretense is rapidly becoming a chief cause of loss for automobile dealers. Your inventory policy offers two forms of False Pretense coverage for your dealership. The first coverage is theft of a vehicle using a “trick, scheme or device” getting you to voluntarily give up the keys. The second coverage is for a vehicle that you take into inventory from a person who did not legally own the vehicle. To help avoid these types of losses, it’s encouraged to follow the suggested “best practices” below.

Before delivering a vehicle to a prospective buyer, follow these steps:

(1) Customer Identification – photocopy and save on file:

• A copy of a prospective buyer’s driver’s license. It is recommended that the license have photo identification and is visually checked by dealership personnel.
• A copy of a prospective buyer’s insurance card, which should be current and match the information on the driver’s license.
• Call the insurance carrier or agent to verify coverage and information.
• A copy of a major, nationally recognized credit card.
• Interview the prospective buyer to obtain information such as home and work addresses, and telephone numbers.
• Obtain a fingerprint of the customer.
• Verify the prospective buyer’s employment.

(2) Verify the source of funds:

• Unless the buyer is well known to you, only accept cashier or certified checks, or credit card if your business allows.
• You need to verify that any checks or payments are coming from a valid account and that the banking or transaction information is not forged, counterfeit, non-existent or from a previously closed account.
• It is recommended to never accept a small payment and deliver a vehicle based on the prospective buyer’s promise to either return with remaining funds or to obtain alternate financing.  The entire transaction should be certified by a financing source or be paid in full prior to delivery.

If any of the above criteria cannot be met, ask the prospective buyer to return as soon as the information can be evaluated and/or confirmed.

The above information is a brief explanation of loss prevention measures. No warranty of the suggestions or recommendations are implied or made.  This information is not intended to constitute legal advice.  Please see your legal counsel for legal advice associated with the above suggestions.