skip to Main Content
KPA Logo

What’s Hot on the Hotline? Credit Card Fraud Alert

Robert Ebin /
business people shaking hands

Have you thought about credit card fraud lately? If you are like most dealers out there, then the answer to this question for you may be “no, not really.” With the recent enactment of the California Consumer Protection Act (CCPA), perhaps your focus has been more on consumer privacy protection. Or maybe, in this day and age with the invention of Apple Pay, PayPal, chip readers, and the like, you thought that credit card fraud was slowly becoming a thing of the past. While this may be so eventually (and hopefully), we have received several calls on the hotline informing us of a recent scam involving credit cards that dealers should aware of. With that said, the purpose of this alert is not to drum up fear, but rather to briefly inform our readers of this scam and to remind everyone of some best practices to combat it.

The Scam

We have heard a few different versions from different dealers, but the story starts with a customer showing up late in the evening on a weekend right before closing. The customer quickly peruses the lot and decides on a vehicle. She (or he) grabs the nearest salesman and tries to rush through the sales and F&I process. The customer is insistent that she wants to pay for the vehicle in full on her credit card. In the situations that we were made aware of, the credit card itself looks different and some dealers have speculated that it may be a foreign credit card. The card is declined multiple times and appears to require additional authorization from the customer. The customer calls a number and is provided a temporary code over the phone, which allows the charge to go through mysteriously. The customer then leaves with the vehicle, the salesman and F&I manager are happy because they just made a sale at the end of their day, and all seems right in the world.

Time passes (about 60 days to be precise), and the deal is long forgotten. However, the dealer then receives a notice from their bank that a large credit card charge from two months prior had been reversed. The dealer retraces its steps and recalls that the charge was linked to the customer’s deal. The dealer pulls the deal file and attempts to contact the customer to rectify the situation, but to no avail. The customer is long gone with the vehicle, leaving the dealer holding the bag.

Best Practices

So, how do you prevent this scenario from happening to you? The first countermeasure (and perhaps the most important one) is to have a policy that places a cap on the amount that can be charged on a credit card. We recommend setting this cap at $5,000, with the assumptions that 1) your lender allows for down payments to be made by credit card in the first place, and 2) your credit card vendor’s merchant agreement allows for such a cap. Installing a cap minimizes the amount of the processing fees to be paid by the dealer and also minimizes the effect of the customer’s “stop payment” ability. As you may know, but hopefully not from experience, a credit card issuer can charge back any disputed amount against the dealer and under the shroud of “customer service” the issuer likely will. This chargeback can be up to 60, or even 90, days after the transaction occurred, long after it is forgotten about by everyone associated with the deal. [See Civil Code § 1747 et seq.]

Secondly, dealers must train employees to follow dealership policies. Employees must know to stay within this cap limit. If a customer is insistent in charging more than the capped amount, employees should involve upper management, and have management make the final decision.

Similarly, employees should be trained to spot irregularities in a potential transaction.  In our example above, when seeing a credit card that looked different from an average card and that gets declined multiple times, the employee should have slowed things down and reached out to a superior to get a second opinion. Remember, this scam, as with many, works in part by attempting to hurry things up, which tries to force dealership employees to ignore or overlook policies and best practices.

I wanted to end with a couple of quotes from the legendary UCLA basketball coach, John Wooden, that I believe are appropriate for this situation: “Be quick but don’t hurry,” and “If you don’t have time to do it right, when will you have time to do it over?”


If you have any questions regarding this or any other situation that may arise in your sales or service departments, hotline clients are invited to contact us at (800) 785-2880 (then press “4” for hotline) or [email protected].

Back To Top Services: Compliance Services Services: Workplace Health and Safety Services Services: Environmental Risk Management Services About: Leadership Software: Online Training About: Who We Are Resources: Library Resources: Events and Webinars Resources: Blog YouTube Twitter LinkedIn