BEWARE: Credit Card Fraud

Recently I was speaking with several dealers, discussing some odd activity from a prospect.The discussion centered around a prospect who lived out of state and inquired about purchasing a retail unit with a credit card. The other dealers and I all advised him there were definitely red flags high on upon the flagpole, and told him to walk with caution.
I didn’t think much about that conversation until a few weeks later. I was traveling to an on-site consult when one of my retail 20 Group dealers – who was not part of the earlier conversation – called. The call began with, “I need some advice...” He then told a story that had my stomach in knots very quickly.
His dealership is in the Midwest. A prospect called about two vehicles on his website. The prospect was in New York. After a few days and several phone calls,
the prospect said he thought the price on the two units (which were not unique vehicles) was fair. He asked the dealer if he could ship the two units to him in New York and offered to pay for shipping.
The dealer priced out shipping and the prospect asked if he could pay with a credit card over the phone. The dealer said he couldn’t do that because there was a high merchant fee involved, so the prospect offered to pay for both shipping and the credit card merchant fee.
I know. Your stomach is in knots, too.
The dealer took the payment and made a high gross profit on both units. He told me he was a bit uneasy about the deal, so he decided not to ship the two cars until the money cleared and hit his bank account. After a few days, with the $56,000-plus payment sitting safe and secure in his bank account, the dealer – still a bit nervous – shipped the vehicles to New York.
After a week or so, the dealer noticed more than $20,000 had been taken out of his checking account. The dealer quickly called the bank and was told the credit card company had withdrawn the funds from one of the vehicles.
This is about the point in the story when the dealer called me. Sadly, he is now waiting for the other $35,000 to be withdrawn from his account, which could happen today, tomorrow or a month or two down the road.
The buyer used separate credit cards under the same name to purchase the two vehicles.
The dealer’s insurance will provide some assistance in this situation, but it’s possible the insurance claim(s) will not cover all of his losses.
I brought that story up in my most recent 20 Group meeting. I was surprised at how many dealers have been received offers for purchases using credit cards over the phone. Here are a few tips if you find yourself in a similar situation.
First, consider a credit card limit per purchase. For example, some dealers will only accept up to $5,000 per vehicle on a credit card. The difference must be paid using another method of payment.
Next, be very skeptical when a prospect resides in a different state, is interested in purchasing vehicles that are not unique, and is willing to pay a market price plus shipping and credit card merchant fees.
Logic should pose this question: Why would an individual pass three or four states, each with thousands of dealers carrying the same vehicles at the same prices, and be willing to pay for shipping and credit card merchant fees on top of that?
Finally, verification of credit cards can be made by calling the credit card company.
Credit card companies have sophisticated fraud prevention departments. By calling customer service on the back of the credit card and creating an inquiry on the purchase, you remove much of the risk of accepting a fraudulent payment.
Speak with an attorney who specializes in vehicle sales and implement safeguards that are compliant at the federal, state and local levels to reduce your exposure.