— A Ohio shop receives a $5,000 invoice for four laptops purchased using an Office Depot account established – in Alabama – using the shop’s name and federal tax ID number.
— A California shop owner receives a call from a credit card fraud department warning that the shop has processed multiple credits – but never any charges – on one credit card, subsequently tracked to the shop’s bookkeeper.
— A West Coast shop accepts payment from a customer in the form of a money order, presuming that it must be good since money orders must be paid for with cash, only to learn several days later the money order was counterfeit.
In what is already a challenging industry, shops in recent months have found themselves the target or victim of a wide range of fraud and scams. The tough economic period the country now finds itself in is only apt to increase such illegal activity – and make it more important than ever that shops take steps to protect themselves.
Here’s a look at some of the latest or most common ways businesses in the industry have fallen prey to the unscrupulous, and what you can do to avoid the same fate.
An Inside Job
Police last summer arrested the bookkeeper of a collision repair shop in Clovis, Calif., saying she embezzled $415,000 from the business. The shop owner said the woman worked at the shop, which has annual sales of about $3.5 million, for about four years. During that time, authorities allege, she would run credits of up to $1,000 a month on a personal credit card (a call from the bank about this activity is what alerted the shop owner). She also would indicate in the shop’s books that checks made out to herself were actually payable to shop vendors.
“Because she balanced the checkbook, I never looked at the checks,” the shop owner said.
He suspects the total amount he lost may be closer to $1 million.
“It will take 10 years or more to make this back,” he said.
One thing he now recommends: Conduct background checks before hiring. He said he had been unable to check the woman’s references because, ironically, her last two employers had gone bankrupt. But a background check would have alerted him she’d had some trouble in her past.
Other internal fraud prevention tips: Sign checks yourself or review copies of checks each month. Make sure all checks are accounted for, including those damaged or voided. Compare accounts payable checks to vendor statements. Assign different people responsibility for writing checks and reconciling the account. Have bank statements mailed to your home.
Phony payment
One West Coast shop owner said an employee at one of his two locations accepted a pair of money orders, totaling nearly $2,000, from a customer for repair of a vehicle. The employee was under the impression that all money orders are good because you have to pay cash for them.
Several days later, however, the shop’s bank returned the money orders as invalid. By calling the phone number for the business where the money orders were supposedly issued, the shop learned they were counterfeit.
The shop owner said the fraud could have been avoided if the shop had done a better job verifying the identification of the customer and matching it to the money order and vehicle registration. Between the fake names, addresses, signatures and phone numbers given by the customer and on the money order, something should have raised a red flag, he said.
He said his managers now know that any type of check or money order needs to be validated before a vehicle is released. Fake cashier’s checks also have been used in scams. So if something doesn’t seem right, ask the customer for cash, driving the customer to the bank, if necessary
Credit card fraud
At least two shops recently have reported receiving operator-assisted “relay calls” (designed to assist the hearing impaired) from a “Dr. Sherry Smith” who says she wants to get a vehicle painted. The caller offers to put $1,000 down on a credit card, but wants the shop to wire $820 to a shipping company that will deliver the car to the shop.
Similarly, Alpine Autobody in Vancouver, Wash., earlier this year received a “relay call” from a would-be customer who said they were in an accident on the way to Texas and wanted to have the car towed back to the shop. The tow company didn’t take credit cards, the caller said, asking the shop to charge $3,500 to the caller’s credit card and wire the money to them near Texas.
The Better Business Bureau of Northern Indiana cautions that such exchange of funds usually involves a scam using stolen credit card numbers.
Sensing a scam when she took such a call, Muffy Revell of Sisk Auto Body in Owings, Maryland, said she contacted AT&T and the Federal Communications Commission about such a call the shop received last year and was told the calls often are placed via the Internet and thus cannot be traced.
She did receive a packet of information from the FCC including its alert reminding businesses that they should not hang up on such callers (the Americans with Disabilities Act requires companies to make their services available to those with disabilities) but to take precautions when accepting credit card payments:
—Be wary of cards that are not signed or lack the standard security features (hologram, 3- or 4-digit security code).
—Consider asking for identification from anyone paying with a credit card.
—Use the address verification service that card processors offer. This is particularly important when accepting a card payment over the phone. It allows you to enter the cardholder’s address in addition to card number to make sure it matches the account.
Nefarious vendors
It has been a few years since shops have reported this scam but in case you missed it: A bedliner company calls saying they will do the marketing and send the shop referrals if the shop buys its bedliner products from that company. The shop is soon told that a referral has come in for a fleet of trucks that will require the shop to pre-purchase a large order of material to perform the work. The fleet of trucks never show up, and the pre-purchased material ends up being not usable and/or unreturnable.
Protect yourself by being cautious about those you choose to do business with, checking them out much as you would a new hire.
Protect your ID
Two shops in the same small town in Ohio say their companies’ federal tax ID numbers were fraudulently used last year to establish cell phone accounts or make purchases at national office supply chains.
Dawn Hilty of Wingate Body Shop in Findlay, Ohio, said she received a call last spring from AT&T to confirm that her business was applying to purchase 25 cell phones. She received similar calls over the next week, learning someone was attempting to purchase a total of 100 cell phones.
The following week, she received a letter from Staples saying it was denying her credit application (she had not applied) as well as an invoice from Office Depot for $5,224 for four laptop computers purchased in Montgomery, Alabama.
Vanessa Boutwell-Dietsch at Boutwell Collision, also in Findlay, had a similar experience, getting calls about attempts to establish credit in her company’s name (using its federal tax ID number) at Home Depot and Cincinnati Bell Wireless, and receiving a Staples card showing the shop had applied for and been approved for a $5,000 credit line.
Both women say they are out no money, but after hours spent on calls to the police, FBI, Federal Trade Commission, banks and credit bureaus, they now realize there is far less in place to protect businesses (as opposed to individuals using Social Security numbers) from such “identity theft.”
Hilty said she eventually was able to get a fraud alert placed with Dun & Bradstreet. But she and identify theft experts caution businesses to protect their federal tax ID number by:
—not including it on estimates;
—limiting how many employees have it and ensuring they know how it is to be used or shared;
—not giving it out to callers without confirming who they are and that they have a legitimate need for it; and,
—shredding any documents to be disposed of that include it.
There’s no way to protect your business 100 percent from a determined scam artist. But by following the advice outlined here, and helping your employees develop their own nose for deals that aren’t such deals, you can at least make sure the unscrupulous have to work as hard as you do in order to get at any of your money.
John Yoswick