The March 2016 You Auto Know discussed the issue of identity theft and a real world case that I was involved in at the time. Since 2016, this author has been involved in numerous identity theft issues, specifically targeting automobile dealers. At that time, I stated that “the first line of defense the dealership has in defending itself regarding this type of situation is information. The more information the dealership has of the individual purchasing the vehicle, the better it can assess whether or not the transaction is legitimate or to present to a court that the dealership took all reasonable steps to determine the purchase was legitimate.” This is still true today, particularly if you need to turn the matter over to your insurance company for coverage.
However, the reality of the situation is that case law is not on the dealer’s side. As you know, in order to utilize the services of a financial institution, the dealership must enter into an agreement with the financial institution for its services. That agreement is typically one-sided, onerous, and definitely not dealership-friendly. The typical representations and warranties in the dealer agreements are, for example, that the customer has authorized the transaction and the transaction shall be valid and binding on the customer who executed the sales documents in the presence of dealership personnel. Further, the lease/financing agreements shall be enforceable against the individual who executed the documents. The signatures of the consumer have to be genuine and constitute the legal, valid and binding contractual obligation of those purporting to be bound. There are some provisions that may benefit the dealer, for example, “to the best of dealer’s knowledge” the information provided is, for all intents and purposes, accurate and the dealer has no knowledge of any facts that would impair the value or validity of the transactions. Generally, further terminology states that the dealer will not be obligated to the bank except in cases of fraud, willful misconduct and/or breach of the agreement or any representations of warranties in the agreement. Additionally, there are broad representations and covenants placed on the dealer, for example, the dealer has verified the identity of the customer by driver’s license or some other method, the dealer doesn’t know of any events that would cause the uncollectibility or enforceability of the lease or contract and, the catchall, that the statements in the lease or contract are true and correct.
It has been argued, generally, unsuccessfully by dealerships that the financial institution is the entity that makes the final determination regarding the contract and the financial institution is in a better position to verify the veracity of the information provided on the credit application and any other stipulations provided.
Courts have generally stated that the representations made by the dealer are enforceable and it is the dealer’s representation that the information provided is true and accurate; that the individual is a bona fide purchaser able to enter into the agreement, and that the customer has accurately represented his or her identity, information on the credit application and other documentation. Finally, the courts generally rest upon the dealer’s representation that any representation, warranty or other information provided is accurate. This is sufficient grounds to show that the dealer breached the agreement with the financial institution and is obligated to indemnify the financial institution regarding the identity theft.
As stated earlier, get and verify as much information as you possibly can. I know there are several companies and marketing and marketing services that state they can help deter identify theft, for example, scanning driver’s license for authenticity. While this newsletter does not promote any product, any additional layer of protection is recommended.