How to Prevent Your Borrowers from Falling Victim to Greed Scams

With the rise of social media selling has come a rise in scamming, introducing devastating fraudulent activity like greed scams. Common types of greed scams occur when a consumer is selling their vehicle on the open market using social media platforms like Facebook Marketplace. This creates the opportunity for scammers to contact them and begin the process of stealing the seller’s vehicle.

Every day, consumers are falling victim to these scammers, leaving them with no vehicle and an auto loan to cover. While it can be difficult to spot these scams and stop them in their tracks, there are some steps your financial institution can take to protect your borrowers and your auto loan portfolio.

The Tactics These Scammers Use

Greed scammers follow a general outline to scam your borrowers, ultimately scamming your financial institution in the process. This is what greed scams generally look like:

• • Step 1: Your borrower puts their vehicle up for sale on a social media platform.

• • Step 2: The scammer contacts the seller, posing as a buyer, and offering to purchase the vehicle from them.

• • Step 3: A 3-way call occurs with the scammer, the seller, and the seller’s financial institution (FI) to pay off the consumer’s auto loan. The FI representative will take the required steps to verify that they are speaking with their borrower.

• • Step 4: Once this information is verified, the scammer will provide routing and account numbers for “their” account, which is more than likely stolen or fraudulent. These scammers can be hard for your staff to spot, as they are generally friendly and provide answers to the questions they are asked with little to no hesitation. The FI will then begin processing the payment to pay off the loan.

• • Step 5: At this point, the borrower could believe the deal to be done and the loan to be paid off. This means they could be convinced by the scammer to turn their vehicle over before the transaction goes through, allowing them to get their hands on the vehicle. Many are unaware of the fact that it can take a number of days before the transaction is processed completely. Processing is when the transaction will fail. The scammer is not concerned with the consequences of this failed transaction — for, as long as they receive the physical vehicle, they are not concerned with receiving the title.  

• • Step 6: Ultimately, this leaves the borrower with an unpaid loan balance and no vehicle.

Red Flags to Watch For

It is not easy to catch these scams, as there is no one way to tell if a transaction is fraudulent prior to actually processing it. However, there are some red flags your representatives can keep an eye out for that will tip them off to suspicious activity. These red flags include:

• • Auto loan payoffs that are coming from a third party.

• • The borrower does not know the buyer personally. Your representatives can generally find this out through casual conversation.

• • The buyer has been found on social media.

• • The buyer is present on the call and provides routing and account numbers to the representative, or the buyer has provided your borrower with these numbers prior to the call.

• • The buyer is using multiple accounts to fund the payoff.

• • The answers you are receiving from either party seem rehearsed or coached.

• • The buyer is presenting an abnormal interest in obtaining a clear title as quickly as possible.

• • The buyer has no questions whatsoever about the title, presenting little to no interest in the subject.

• • The buyer asks that the lien-released title is sent to a different address than what is on file.

While these red flags are not 100 percent effective in determining fraudulent activity, they could generate enough suspicion to allow your financial institution and the borrower to take the necessary steps to ensure their financial security.

How It Impacts Your Borrowers and Financial Institution

The financial impact these scams have on your borrowers and financial institution is devastating, costing thousands of dollars. However, the direct dollar loss of these scams is only one component of this form of fraud. The scam can be costly in both disruption and cost to you both.

Since the borrower is ultimately responsible for paying off the loan, regardless of whether they fell victim to a scam or not, they are still responsible for paying for the loan — now with no vehicle in return.

The borrower will have to file a police report, and if the vehicle is found to be damaged, insurance claims will likely be necessary. If the borrower has already canceled their insurance, the FI may have to place their own lender-placed coverage on the vehicle and then file a claim with their insurer.

In the meantime, the borrower must still pay the high price of their loan, has no vehicle, and are faced with the possible need to take out yet another loan, potentially financially devastating the consumer.

If these scams become commonplace at your financial institution, you may face fines and other legal and reputational consequences for failing to utilize policies that are effective in helping to prevent scams.

Don’t Miss These Verification Steps

Verification is critical to protecting your consumer and financial institution from devastating loss. Don’t miss these essential verification steps when conducting these transactions for your borrowers:

• • Learn how the buyer and seller found each other.

• • Ask the individual giving you the account information if they are the account owner. If the borrower is presenting the accounts for payment, confirm that they are the account owner.

• • Follow your staff’s intuitions. If a staff member is suspicious about the transaction, follow internal procedures and immediately notify the account manager. Your FI may then decide to call their borrower separately to discuss the transaction more in-depth.

• • Have your staff provide your borrower with next-step instructions. An example of this can include: “(Customer name), I want to let you know that it can take 3-7 business days for these payments to clear through the payment systems. While we are waiting for these payments to clear, and for the FI to release our lien on the title, please ensure you retain physical possession of the vehicle. We will release the lien on the title in (specified time) and you should receive it in approximately (#) days.”
    
    • • This simple guidance could save both your borrower and your financial institution from the scam. If the information is shared on a three-way call with the scammer, they will now be aware that they will likely be unable to talk the borrower into turning the vehicle over prior to the transaction going through. They may still pressure the borrower to do so, but they may also simply move on and accept defeat. Then, when the payments fail, the FI can just back the payments off the auto loan, leaving the borrower and financial institution right back where they started. Your borrower still has their vehicle, the loan is still securely in place, and the borrower can still attempt to sell their vehicle to a legitimate buyer should they choose to do so or continue making payments as they were before.

How You Can Keep Your Employees Aware of These Scams

Your staff is the first line of defense for all types of scams, making red-flag education critical. Keep your employees aware by ensuring they know:

• • To avoid accepting third-party payoffs for auto loans if possible. Cash payments or wire transfers are effective alternatives to offer. Cashier’s checks can be faked and don’t tend to be much safer than a personal check.

• • Making small talk to learn if the buyer and consumer know each other or if this sale was initiated through social media could be incredibly effective in helping you catch red flags.

• • Giving clear and concise next steps (like the ones described above) protects your borrower and your financial institution from scammers.

• • To trust their intuition. Your team should report any oddities or suspicions to a manager right away so your financial institution can investigate the case and ensure financial security.

What to Do if You Believe Your Borrower Has Been Targeted

If you believe one of your borrowers has become a target for a scammer, you should start by contacting them immediately to inform them of the failed transaction. Your financial institution should not release the title until the matter has been cleared up, and you should confirm with your borrower that they are still in physical possession of the vehicle. If your borrower is no longer in possession of their vehicle, your financial institution should encourage your borrower to file a police report immediately. This could help increase the chances of recovering the vehicle and helping your borrower get back on track for their auto loan.

 

How SWIVEL Can Help You Combat Scammers 

These scams can happen in any financial institution, whether they are large and well-established or smaller. However, taking the right precautions could make a world of difference in your borrower’s financial security. SWIVEL takes the potential for scams and fraudulent activity seriously, closely monitoring each and every transaction for suspicious actions and information to ensure your financial institution is able to uphold its reputation for secure transactions. Our systems are quick to catch failed transactions, and our team is fast to report them to your financial institution. Are you ready to send your payments to the future in a secure, effective manner? Contact a SWIVEL representative today and see how we can help!