OK, I may now have seen it all.

Alright, probably not, but it sure seems like it.  I received an email from one of the top Special Finance directors, working in one of the best dealerships in the country.  It is always good to hear from him, but this time, I was stunned.  I didn’t know whether to laugh or to shriek with what I saw. Reflecting back a day later, I don’t know why I was so shocked or surprised.

It seems that he had been contacted by his Ally representative who was just giving him a heads up.  It was not for anything he or his dealership was involved in, but another dealer in his market had been, and it shows how easily you can be caught up in customer-dishonesty.

When it comes to Special Finance, many finance companies require proof of income for most of their credit tiers.  This is certainly nothing new.  What is new are the ways that customers are getting creative to prove their income. Thanks to modern technology and the Internet, it is now possible for customers to not only go online and create whatever paystubs that they need to verify whatever income they are stating on their credit applications, but also pay the “creator” to use a phone number assigned to them to have their job and their “stated” income verified when the finance company calls the number.

Yes, you read that correctly.  I was stunned. Go to Google and search “create paystubs” and see what comes up – services everywhere the consumer pays, at most, a couple of hundred dollars, including web sites with photos of people standing by their new cars offering testimonial.  Really? Give me a break!  Things have come a long way since one of the 1972 Super Bowl Champs came strolling in with some really creative hand-written paystubs (the real computer-printed dates crossed out and hand-written “updates” added).

I also remember about seven or eight years ago when a large volume SF dealer I knew used to have five incoming phone lines to verify income/employment and five incoming lines to verify residence, and every credit app used one of those numbers for each.  Can you say, “Bank Fraud?”

I presented this and the accompanying warning at my most recent two-day Special Finance training school.  The class laughed and seemed genuinely equally surprised.  Then one person asked – probably the only one daring enough to comment – “Do you think we could use it if they really do get paid what they state, but they are hand-written stubs that the finance company won’t accept?”  In a word – “NO!”

This stuff is totally off limits! Don’t even be tempted.  The criminal penalties are fines up to $1,000,000 and/or up to 30 years in prison.  Personally, I know a couple of people that have been forced to learn that the hard way.

Sure, if the consumer is bold enough to go online and create their own paystubs and bring them to you, there is little you can do outside call (hopefully a real number) and verify the employment and income (something you should do).  If you are duped, which certainly could happen, you will without a doubt get to unwind or buy the deal back, but if innocent of wrongdoing, you should be able to dodge criminal circumstances.

On the other hand, if you knowingly participate or worse yet, go online and create fraudulent paystubs, the federal statute states it is considered Bank Fraud when someone “…knowingly executes, or attempts to execute, a scheme or artifice to obtain any of the moneys, funds, credits, assets, securities, or other owned property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations or promises.”  I am not an attorney, but I assure you this covers the act of making fake paystubs.

With the ramp up of the Consumer Finance Protection Bureau and stepped up enforcement from the FTC, you will get caught. Even if they don’t catch you, the Special Finance business has always required, and still does, a strong relationship between dealers and banks/finance companies.  Get caught with your hand in the cookie jar, and even if it doesn’t become criminal, it will ruin a relationship and that is something in this day and age, you can certainly ill afford.

Dealers, if you are reading this, I’d go one step farther to the extent to block these web sites from being able to be accessed on your computer networks.  Doing so would certainly keep you one step farther away from a pointing-finger.

The Special Finance industry is a great industry, but it is a small industry.  If one bank or auto finance company knows about stuff like this, it is a good bet they all do.  There are enough ways to accidentally fall into a “bear-trap” without creating one for yourself.  Don’t even think about it!

Until next month,

Steer clear!