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By Ed McArdle
Fraudsters, thieves and con men of all types love rental cars and the companies that rent them: what scamp wouldn’t love a company that will hand over to its customers assets valued at as much as $40,000 (or greater) based on little more than a piece of plastic (a credit card, hopefully valid), a driver’s license (which may or may not be legitimate) and a promise to return on a certain date, at a certain time, to a certain location. And the people in the car rental business actually expect to make a profit?!
Why are car rentals so popular with criminals? The growth of forfeiture laws is one major reason. Under these laws, a drug dealer runs the risk of losing his car if he is caught transporting drugs. While the loss of a car here or there may be seen as nothing more than the cost of doing business, the typical drug dealer is, if nothing else, a consummate capitalist. He wants to make as much money as possible and to reduce his exposure as much as possible. Therefore, it is certainly preferable for him to rent a car when he needs to move drugs. If he is caught with drugs while driving a rental car, the car may be seized by the authorities; but that’s the car rental company’s problem, not his.
By driving various rental cars, the criminal also avoids the risk of having the same car seen over and over by law enforcement. He can have a different car for each run, and he can stay away from the types of cars that law enforcement is currently “profiling.” (Law enforcement has a specific profile of the type of cars with the type of occupants that typically are involved in drug transportation/sales). Since the car rental companies removed much of the identification that shows the car belongs to a car rental company, drug dealers/transporters have come to love them even more.
Home burglars, such as the Gypsies, have also learned to use rental cars. The Gypsy knows that driving into an upscale neighborhood with a beaten-up rust-bucket will attract all kinds of unwelcome attention and that people will be much more suspicious of him and more likely to remember him. If, on the other hand, he can rent a car that fits in with the neighborhood he is in, people will be a lot less likely to pay him any attention. This very anonymity works to his advantage, decreasing the likelihood of his capture.
Criminals also know that car rental companies try to be customer-service oriented: if a customer comes in claiming that his rental car has a problem and wants to trade the car for another one, the car rental company will more than likely give him another car, no questions asked. In fact, in most cases, the only thing wrong with the car is that it was “spotted” at the scene of a crime and the criminal wants to cloud the record of who had the car at what time. This may work because many car rental companies have difficulty in tracking a customer through multiple exchanges.
One Gypsy case I worked a number of years ago included 26 defendants and hundreds of rentals involving more than 50 aliases. When the criminals were arrested, they had more than $1,000,000 in stolen property. Using a classic tactic, one of the defense attorneys asked me if there was a single record that showed his clients were anything but “good customers who frequently got ‘bad’ cars.” I replied that he was mistaken; there was a computer record that said, “These guys are real beauts. They came in every day complaining about every car they had, and there was nothing wrong with any of the cars.” When I mentioned that it made no sense for someone to continue renting cars from a company that obviously had such defective vehicles, the judge broke up laughing; the attorney, instead of objecting that I was unresponsive, sat down and said that he had no further questions. (25 of the 26 defendants pled guilty). Thereafter, any time a Gypsy came in with a car problem we found that some of the belts had been cut so that there was “something” objectively wrong with the car. (We tend to teach the thieves how to get it right the next time).
Insurance fraudsters love car rentals since there is so much that they can do with them. In one scam, the crook rents a car that matches a wreck he has already bought. He then takes the rental car down to the insurance agent to get his “new purchase” insured, making sure to distract the agent at just the right time so that the agent misses the fact that the VIN numbers don’t match. After the agent writes the application for insurance with the VIN number of the salvaged vehicle, the rental car, which has served its purpose and legitimized the transaction, is returned. The car is then involved in a fictitious accident, and you guessed it, the car is reported as totaled. Out comes the salvaged vehicle, and lo and behold, the numbers on this vehicle match those on the insurance application. (This particular scam works especially well with insurance carriers that are not members of NICB since it is doubtful that the carrier will know of the prior salvage).
One variation of this scam is to report the car stolen. After the insurance claim is settled, the salvaged vehicle is left somewhere where it will be found by law enforcement and is often recovered as a total loss.
Another variation of this is to rent a car and then intentionally wreck it by running a confederate’s car into it. The rental car is brought to the drive-through claim service of the other driver’s carrier and presented as the claimant’s car. After it is appraised, the car is then returned to the rental company. The company is told that the renter parked the car at a shopping mall, and when he returned from shopping, he found the damaged car. Of course, when he rented the car he made sure to buy the collision coverage. He walks away with no responsibility for the rental car and collects from the other carrier. (One person who was working this particular scam between Truck rental companies and car rental companies ended up enjoying the hospitality of the great state of Arizona).
Car rental companies are also great sources of vehicles for countries that have great demand for new cars and surplus capital to spend, yet have no access to goods. For example, China has an emerging class of wealthy people who have no real access to luxury cars; so they have turned to car rental companies. A rented vehicle is loaded on a boat and then reported stolen. We know of over 100 cars that are currently in China, and numerous arrests have been made. However, the car rental and leasing companies continue to be hit. The criminals have learned that if taking a leased vehicle is not considered a criminal offense in most states – it is strictly a civil issue. (In a similar manner, some States are attempting to decriminalize theft of a rental car.. This can be a great way to knock down stolen car statistics with little effort. All it takes is for the Governor to sign a piece of legislation).
The above doesn’t even address good, old-fashioned “bodily injury” fraud. Rental companies are not immune to one of the most prevalent current forms of insurance fraud, the uninsured motorist fraud. In this scam, the crook rents an automobile and purchases all the coverage that the car rental company has. (He wants to be sure the car rental company makes some money on the rental). What he really wants is to buy coverage for uninsured or underinsured motorists. Once the coverage is in place, the “accident” is staged – usually late at night – with 3 or more of the crook’s friends acting as passengers. The rental car is struck by another car that usually stops and then speeds off (often having to go around the rental car). One case that is currently under investigation fits the above scenario, but in addition, the renter made great efforts to ensure that he had every bit of coverage that was offered before he walked out the door; in fact, he was so anxious to make sure the accident was covered that he asked the rental agent 3 times. Imagine the surprise when he came back just one hour later after having an accident with a hit and run driver!
The reason this type of fraud is so popular is that the case can’t go to trial in many states. Instead, it goes to arbitration (by statute in some states; by contract for many car rental companies). So, the fraudster knows he will end up with some money since Arbitrators are notorious for always giving money. He also knows he can get the car rental company (or its insurance carrier) on the hook for first party coverage and a possible “Bad Faith” lawsuit that will garner them even more money.
Another reason car rental companies are such great targets is the small cash outlay needed to prepare for the fraud: where else can you get $500,000 or $1,000,000 liability on a brand new car for $40 or $50 dollars a day? The typical crook understands that he is not going to get $1,000,000 (although in a couple of our current cases, the crooks are doing their best to get every penny). The fraudster understands the adjuster’s mentality: a) close cases and b) avoid paying the policy limits. If the policy limits are 15/30 or 20/40, there is the chance of leaving money on the table. This way, for an extra $10 or $15 a day, the criminal can get the policy limit raised, helping to relieve the pressure on the adjuster. Now, if the adjuster settles for $40,000 on what would have been a 15/30 policy, the fraudster has scored an extra $12,000 or so (the crook knows the adjuster would probably have only given him $28,000 on a $30,000 policy since the adjuster had to “save” something against the policy limit).
If the crook were to try to purchase a $500,000 policy on a 1978 Monte Carlo, someone would ask questions – especially when the car was involved in an accident the next day. These folks like car rental companies because there are so many of them. They can hit 10 or 15 companies in one medium-size city without ever hitting the same one twice. This is somewhat harder to do that with insurance companies – unless you want to go into the Assigned Risk pool, and adjusters are almost always suspicious of claims from that group – especially when the policy is fresh.
Fraudsters also love car rental companies because the companies can be the source of a lot of information about customers – great for credit card fraud. In some states, the driver’s Social Security Number is used for his driver’s license number. This number, along with the renter’s date of birth, work information and home information, all goes on the car rental agreement with the renter’s credit card information. These rental agreements are often left in the car when the car is returned through the automated return process. The car is cleaned out and all trash is thrown away. Later that night, a “dumpster diver” comes back and climbs into the dumpster, looking for the gold – the rental contracts.
To combat such schemes, car rental companies are trying to get the credit card companies to agree to put only the last 4 digits of the credit card number on the contract so that these documents will be useless to the dumpster divers. In the interim, some car rental companies are printing the credit card number on the original of the contract but not on the copy given to the customer.
With the wide variety of possible scams that can be perpetrated on the car rental companies, security people who work for the car rental companies fully understand the old Chinese curse, “May you lead an interesting life.”
Ed McArdle is founder of E & E Consulting and specializes in Insurance Fraud issues as well as Security and Safety issues as they relate to the car rental industry. He is a Certified Fraud Examiner and holds a BS in Accounting from Nova University. Ed is also Director of Security, Safety and Special Investigations for Alamo Business Services.
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