Risk & Business Magazine Lloyd Sadd Insurance Brokers Fall 2016 | Page 7

EMPLOYEE FRAUD

BY: HAILEY TASKEY
LLOYD SADD INSURANCE

Fighting Employee Fraud
At Auto Dealerships
Protecting Your Business & Customers

A

s an employer, employee
fraud may not be the most
pleasant thing to think
about. You want to believe
that your employees are
honest and have your best interests in
mind. Unfortunately, employee fraud
is all too real. To protect your business
and your customers, you need to be
prepared to detect and stop employee
fraud before it harms your business.
Because employees often deal directly
with financing, insurance and warranty
options as part of the sales process, auto
dealerships are susceptible to several
unique schemes that employees can
use to defraud the company. Becoming
familiar with the mechanics of these
schemes will help you prevent such
fraudulent activity from occurring.
INFLATED COSTS
In this scheme, the employee includes a
variety of extra items in the final price of
the vehicle. This can be anything from
an extended warranty to gap insurance
to anti-rust coating. However, the
employee does not include these in the
quoted price. He or she instead adds
them, without the customer’s consent,
before breaking down the quoted price
into the monthly payment price.
The scheme relies on the customer
not doing the math to realize that
these extras have been included. To
prevent employees from charging for
unauthorized extras, have customers fill
out and sign a checklist that acknowledges
any additional charges. Have your
accounting department double-check this

by comparing the agreement to the actual
amounts received from the customer.

credit, as those with very good credit are
often aware of their ratings.

UNAPPROVED FINANCING
In this scheme, an employee tells
customers that they have been approved
for financing at a lower rate than they
actually are. After the vehicle is delivered
and has been in the customers’ possession
for a few weeks, they are informed that
their financing was incorrect and that
they will either have to pay a higher rate
or return the vehicle. The hope is that
the customers have grown attached
to the vehicle and will accept the rate
increase instead of returni